1. Indian Crypto Exchange Market expanded at a robust rate, fueled by demonetization, access to the internet, and during & post-COVID investment surge.
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Between 2016 and 2021, the Indian crypto exchange market grew significantly, with a massive increase in the adoption of cryptocurrencies as a mode of investment due to rising industry valuations, an influx of new investors, and the emergence of crypto exchange startups that went beyond the typical crypto exchange model. In the Indian market, cryptocurrency as a cross-border payment medium will make a significant difference. It would drive the prosperity of digital currency growth in India for a long time due to high remittance demand. Because cross-border transactions are often expensive, utilizing bitcoin or other cryptocurrencies as a cross-border payment medium allows Indians to save a significant amount of money on remittance costs. The increased acceptance of cryptocurrencies following COVID-19 is also helping to boost the crypto exchange business by growing its user base.
2. Awareness about Virtual Currencies, with the shift to the P2P model and visualization of cryptocurrencies as a mode of investment is the major contributor to the crypto exchange market in India.
Indians began to seek alternative currency models by 2018 post demonetization in 2016. Many Indians, especially those in the 40 percent bracket with access to the internet began to take up Bitcoin and other cryptocurrency investments. Even, before the union budget for the fiscal year 2022-23, where a 30% tax is levied on cryptocurrencies, virtual currencies were seen as the assets where more tax could be saved than the usual investments done where a higher rate of tax is charged. Also, rapid urbanization in the region complements the demographic change as consumers are shifting to urban cities for better job opportunities.
Moreover, increasing the financial stability of consumers leads them in availing better access to education which helps them to understand a better and clearer version of the cryptocurrency market. Furthermore, constant hindrances from the government, either publishing a circular for preventive measures against cryptocurrency trading or rolling out a circular regarding the ban of all private cryptocurrencies created a dilemma scenario in the mind of traders for regular transaction methods hence they shifted to the peer-to-peer model.
3. Government of India played a major role in the wild journey of the crypto exchange market from forming a committee to draft laws to RBI’s constants warnings regarding the risk associated.
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An inter-ministerial committee under the chairmanship of Subhash Chandra Garg, Secretary of the Department of Economic Affairs, was constituted to draft the regulatory framework for cryptocurrencies. Additionally, India’s “Department of Revenue has been actively involved in the working papers being developed by the FATF on various issues (such as virtual currency, and proliferation financing) which will act as guidance for the member countries.
Moreover, the Financial Action Task Force (FATF), a global standard-setting body created to combat money laundering and terrorist financing, told the G20 recently that it is updating policies on crypto regulation which will be presented at the G20 summit. In addition to several warnings about the risk of investing in cryptocurrencies, the RBI issued a circular on April 6 2018 prohibiting regulated entities from dealing in cryptocurrencies or providing “services for facilitating any person or entity in dealing with or settling” cryptocurrencies.
4. Though India is booming as a hub for cryptocurrencies, there are several issues associated with it such as Operational risks, Cyber risks, and Governance risks
Cyber risks include high-profile cases of hacking-related thefts of customer funds. Such attacks take place on centralized elements of the ecosystem (for example, wallets and exchanges) but can also arise on the consensus algorithms that underpin the operation of blockchains. Other risks include operational risks that can result in significant downtime when failures and disruptions prevent the use of services and even result in large losses of customer funds. Such risks have coincided with periods of high transaction activity and can result from poorly designed systems and controls. For example, on May 19, when liquidations of leveraged positions peaked, major exchanges reported outages, citing “network congestion.” Moreover, as of 2021, there was no proper regulatory framework for cryptocurrencies in India and also the circular by RBI to ban all digital currencies led to investors’ loss as they are afraid of trading their money.
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