In March this year, the Supreme Court overturned a ban on banks providing financial services to businesses handling crypto assets that had been enacted by the Reserve Bank of India in July 2018. But there are challenges ahead that need to be resolved before cryptocurrency goes mainstream in India and is used for widespread adoption.
A recent report by CoinDCX that polled more than 11,300 participants digitally for its survey, including 3,512 of its own customers, majorly belonging to the age group of 25-35, reveals that survey respondents believe the crypto market in India is dotted with challenges and there is still “no easy way to enter” this market, despite the hype.
Legal and regulatory challenges
Though India is home to 17% of the world population, it is responsible for only 1% of the crypto market’s daily volume. The survey found that regulation may be a significant factor holding back Indian crypto traders and investors.
In the survey, all categories of investors said that the lack of legal and regulatory clarity in India poses a challenge to their crypto endeavors. While 60% of the respondents earning below Rs. 5 lakh per annum found that crypto markets lack of easy and seamless options, the sentiment is also shared by 68% of the respondents earning above Rs. 10 lakh per annum. The respondents of both the income groups cited legal and regulatory clarity as a major concern for considering investments in crypto.
Respondents in other categories, including undergraduates, banking employees, respondents older than 40, and real estate investors, also responded that regulations are an issue.
“While outwardly India is set to become the next global player on the international scene, it is extremely important that smart and sensible regulations become a part of the discourse,” Sumit Gupta, CEO and co-founder of CoinDCX said.
Other obstacles to crypto adoption
The Cryptocurrency Industry is certainly growing but there are other obvious challenges. Graduates and respondents aged between 20 and 30 identified “knowledge and education” regarding crypto as the biggest challenge to its adoption. Some believe that the existing industry leaders are clearly unconcerned about educating the masses.
According to experts, the leading exchanges need to invest in community education about different Cryptocurrencies. They must provide clear guidelines for the investor beforehand. For any cryptocurrency exchange that is eyeing long-term growth, it must engage with the governing body and their moderating agencies. This way they can function like any other business segment with complete transparency.
At the same time, cryptocurrency is at the very core of cyberattacks, and that’s clear that from hundreds of attacks that took place just in recent months. These hacks have cost people hundreds of millions of dollars.
Despite the fact that exchanges are taking extra measures to secure their funds, crypto is the target of ransomware and crypto-mining attacks making people reluctant to use these Cryptocurrencies.
“The current trust issues with the retail trader and investor in cryptocurrency can only be solved if an insurance company offers some insurance for the digital asset. At the same time, if any insurance company will offer insurance for the crypto wallets, that will bring standardization and scrutiny for crypto enthusiasts,” Advocate PM Mishra told IANS in an interview as quoted in BusinessWorld.
Growth is inevitable
Despite many crypto firms continuing to complain that banks are reluctant to work with them, India’s digital currency sector has expanded significantly in recent quarters. Even though Cryptocurrencies have been under the scrutiny ever since inception, Bitcoin has seen tremendous growth in a short period. Early this week, Bitcoin has crossed the Rs. 14 lakh mark in India.
COVID-19 witnessed major asset classes showing an inconsistent behavior since investments were dependent on various factors like geographies, demographics, markets and economies. However, Gupta mentioned that Bitcoin was unaffected since it is indifferent from the above and is only based on demand and supply. Besides, it is an outcome of blockchain technology, one of the safest sources of digital money security.”
The Diwali season saw another high, with reports of patrons substituting gold with Cryptocurrencies like Bitcoin and ethereum on Dhanteras and Diwali days.
While 12% of respondents working in the banking industry stated they have owned crypto assets, 22% agree with the statement that virtual currencies are a strong alternative investment suggesting this could be a growth sector in the country.
The Internet and Mobile Association of India is already in talks with government officials as well as regulatory bodies, trying to draft out a regulatory framework under which crypto trading can be done legally in the country. A draft version of a code of conduct for crypto traders is likely to be ready, including KYC as well as provisions against money laundering.
Financial sector giants like Mastercard and PayPal have already opened up their networks to Cryptocurrencies.
The need of the hour is a positive regulation so that ecosystem is clean and drive more startups to work in the areas of blockchain, more jobs, and more tax revenue for the government, as Kashif Raza, Co-founder of Crypto Kanoon, a platform for clearing regulatory ambiguities in crypto said, there should be a strong ecosystem to bridge the gap between the crypto community and people who want to be a part of this community.