One can argue that while Satoshi Nakamoto invented Bitcoin, it is India that may well be the first country to entrench its credibility as an alternative monetary system.
Back in 2013, India distrusted Bitcoin as “Wild West territory”, where scams like Silk Road, a darknet market for smuggling drugs, thrived, and where greedy geeks conned gullible individuals into wasting their money.
Although India didn’t know it at the time, its political and economic conditions made the country a perfect match for Bitcoin. Recent news shows India poised to become the first nation to regulate cryptocurrency.
On November 8, 2016, the Reserve Bank of India (RBI) removed 500 and 1000 Rupee notes from circulation, stripping the nation of 86% of its currency. India aimed to quell its shadow economy and to defeat its never-ending illicit activities. At the same time, this economic crisis indirectly taught its 1.3 billion people that cash was unreliable and that there was a nationwide frenzy with the stock market falling by 7 percent, cash shortages and several deaths from people queuing to exchange their worthless money. A significant disruption to the economy occurred with more of India’s largely younger population turning to Bitcoin. At the time, a large number of industries were already using Bitcoin and shortly, thereafter, the number of investors grew to the point where mid-2017, 2,500 Indians invested in Bitcoin daily, according to The Economic Times. The digital coin attracted people in India since it offered a safer system for their money, a haven from inflation, refuge from government regulation and interference, and a system that avoids political and economic turmoil.
India may be the 7th largest economy in the world with its GDP of $2.5 trillion but a 2016 study by PricewaterhouseCoopers found that 233 million people in India, or 40% of its population, still has no bank account. To put this in perspective, 65 million people live in Britain. This means that there are 3.5 times more unbanked people in India than people who live in the U.K. The fact that so many Indians are unbanked is because you need a form of identification and a fixed address, among other information, which for many homeless Indians is impossible. These individuals, then, rely on cash which hinders their spending abilities. Along comes Bitcoin which allows you to make deals all over the world quickly, cheaply and securely - without needing a bank account. No wonder, then, that to date more than 600,000 Indians use Bitcoin, according to several bitcoin outlets.
Last year, more than 500 merchants in India and five of India’s largest companies, including Dell, accepted the cryptocurrency as payment, according to GBminers co-founder Amit Bhardwaj. The number grows by day. True, that Bitcoin is far from popular, and most Indians prefer fiat money, but a recent Forbes article reports Bitcoin's craze is catching on and that, to date, there are more than 600,000 users in the country.
Although India’s RBI has long warned cryptocurrency users and traders of its perils, Indian President, Narendra Modi, indirectly promoted Bitcoin, on July 2, 2015, with his ambitious Digital India. Plans included digitizing government data, improving India’s digital infrastructure, and optimizing its online connectivity. Last month, the government formed an inter-disciplinary committee to examine the framework on virtual currencies and set up a forum MyGov for public opinion on virtual currencies.
Last week, India’s Department of Economic Affairs in its Ministry of Finance met to discuss how Bitcoin could be regulated. The committee suggested the following: that cryptocurrencies should be governed by the Reserve Bank of India Act of 1934; that Bitcoin investors should be taxed; that guidelines for buying and investing in cryptocurrencies should be drafted; that the IRB should extend FEMA to cross-border cryptocurrency deals; and that users should be taxed on their cryptocurrency returns.
Observers predict that India’s government will regulate Bitcoin in stages. India’s Bitcoin industry welcomes these changes knowing that government acceptance will give the cryptocurrency the backing it needs. In fact, India’s Bitcoin industry has long tried to popularize Bitcoin with strategies that include conducting security checks, requesting identification from users, such as government-verified address documents, Permanent Account Numbers (PAN) or Aadhaar IDs, and sometimes even checking bank details. Private Bitcoin companies have also launched an association, called the Digital Assets and Blockchain Foundation India (BFI), to educate lay people on Bitcoin benefits and usage. Government intervention credits their efforts.
On the other hand, experts wonder whether some of these intended regulations will harm Bitcoin in that government interference contradicts Bitcoin’s allure, while other rules may hamper the blockchain innovation and development.