The trend of cryptocurrency in India has become more popular than in America these days. It seems very surprising at first glance, but the figures confirm this fact. According to the latest report of the Global Adoption Index 2022, the behaviour related to investment in crypto currency is increasing continuously, and on this side, India is currently ranked fourth position in the world, while the US is positioned fifth. The first three places are occupied by Vietnam, the Philippines, and Ukraine.
India’s position is even more surprising because the current Indian economic policies are not very encouraging regarding crypto. Despite this, if India is standing at the fourth position in the world, then certainly this situation forces us to ponder. Two budgets ago, the Government of India made a provision of 30 percent tax on profits from investing in crypto, and the mention of non-adjustment of losses still exists in the Indian tax system. In India, it has been seen for some time now that in order to get attractive returns on financial investments, the affluent section of society prefers to invest in crypto in their portfolio. This thing also seems reasonable because interest rates have been decreasing continuously for the last few years, due to which banking deposits and government bonds are not looking very profitable. It is also clear that if the Indian society is showing its inclination towards financial investment in crypto, then it is taking this risk on its own because there is no provision in the government policies in this regard.
The lack of correct financial information regarding crypto has kept it an unresolved issue in society. Financial transactions can be done in two ways through crypto. Firstly, to use as currency for payment and receipt of various transactions. Secondly, making financial investments in crypto as an asset and earning profits from its price fluctuations.
When used as currency
It is essential to clarify that, till now, financial investments in crypto have been made in India only as an asset and have not been used as a currency in business transactions at all. Here, it is also very important to look at the fact that crypto is being used around the world as a currency in business transactions, mainly due to the following circumstances. When inflation in a country goes to such an extent that its negative effects greatly reduce the value of the domestic currency of that country, that is, the situation of devaluation of the currency in the domestic market. In such a situation, crypto is used by the citizens themselves as payment in their transactions in exchange for a foreign currency. Latin American countries such as Argentina, Venezuela, Peru, etc. can be included in this regard.
Protection of own interests
When the banking system in any country is not highly developed and protective financial facilities are not available for the consumers in the domestic market. Even in that situation, the citizens can use crypto in their bank accounts for the protection of their own interests. An example of this is being seen very rapidly in a country like Vietnam.
Import/export payment medium
Some countries keep restrictions on the movement of their own currency and foreign currency, crypto is being used as a medium for payment and receipt of various imports and exports. Along with this, remittances are also sent by non-resident citizens to their country. This can be seen between Russia and China. Some producers in China carry financial transactions in their country through crypto from Russia.
Trend increasing in neighbouring countries
Another usage of crypto arises in those countries that have reached a level of economic distress due to sudden acute shortages of foreign exchange in the recent past such as Sri Lanka and Pakistan. In both these countries, the trend towards crypto has been increasing very fast for the last few years, and it is probably because their countries have negligible dollars in foreign exchange and gold storage is also very low, so crypto is considered an alternative medium. In the report of Global Adoption Index, Pakistan has been counted at the 6th position regarding the transaction practices of crypto currency.
Influence of international diplomacy
Another perspective is that the quick rise in crypto currency is also influenced by international diplomacy. Since a while ago, whenever the central banks of numerous large nations across the world purchased substantial quantities of gold, there has been concern that perhaps all of this is being done to weaken the status of the dollar internationally. The dollar was artificially boosted against the currencies of every country in the world due to the Fed’s control of interest policy over the previous fiscal year, which led to several issues in this age of globalisation. The abrupt increase in domestic inflation was the main issue in this. Positive effects can also be seen from the conflict between Russia and Ukraine.
Tax flexibility, institutional safeguards needed
It is certain that in the coming few years, crypto currencies will definitely be stronger and will make inroads into financial investments along with payment of transactions. India’s position on crypto is clear on financial investments, but it is not clear with regard to business transactions. For many years to come, it is difficult for crypto to get a place in the Indian market as a currency against the rupee. In this context, India’s own digital currency is also under discussion by India’s central bank under the budget for the current financial year and will give priority to business transactions in the coming time. Crypto is definitely being used by Indian society in financial investments but on this side the Indian tax system is a bit rigid and complex. In the coming time, if some policies regarding financial investment in crypto are clear globally, then only the complexities related to it in the Indian tax system can be removed. India is currently the chairman of the G-20 countries and it is expected that in its meeting to be held in August, India will definitely push for a uniform tax system and economic policies by the developed countries globally regarding financial investment in crypto. It is also very important to understand that Indian economic policies are not encouraging with regard to financial investment in crypto right now. There is no constitutional body in India and there are no legal provisions available through which the interests of consumers can be prevented from economic loss.
