Indian businessman Swati Daga first bought bitcoin in 2017, when the cryptocurrency was trading for less than $3,000. She recalls that her decision to invest in digital currencies was carefully accomplished by her family.
"The elders in my family told me not to throw away my money," said Daga, who runs a food business near New Delhi.
But the 33-year-old doesn't seem to regret her decision — bitcoin has risen 15 times in value since then — and continues to invest up to 10% of her savings in cryptocurrencies, including bitcoin and ethereum.
"I find the stock market boring," she told CNN Business, adding that she enjoys the "thrill" and "recklessness" that comes with investing in volatile currencies.
She is not alone.
India has seen a huge boom in cryptocurrency trading since the start of the pandemic, even though officials in Asia's third-largest economy have for years expressed concerns about digital currencies, and even banning them. messed with the installation. Entrepreneurs in the industry told CNN Business that the country has the potential to become a crypto superpower, as it is one of the world's hottest Internet markets, with 750 million users, and hundreds of millions more yet to come online for the first time. ,
According to a report published in October by blockchain data platform Chainalysis, India was ranked second only to Vietnam last year in the list of countries seeing the fastest growth in cryptocurrency adoption.
Although the government does not keep estimates of how many people trade cryptocurrencies, industry experts have suggested that there may now be over 20 million crypto investors in the country.
The growth is driven by young investors - mostly under the age of 35 - and many of them coming from smaller cities and towns, the founders of India's two largest crypto exchanges told CNN Business.
According to Sumit Gupta, CEO and co-founder of CoinDCX, many Indian millennials have “started their investment journey with crypto”.
Whereas 20 years ago, their parents chose to invest in gold, these youngsters "are more interested in having bitcoin as part of their portfolio," Gupta told CNN Business, referring to the fact that Traditionally Indians have chosen to invest their money in gold or savings. Accounts.
According to the World Gold Council, buying gold is an investment and cultural habit in India, which is one of the largest markets for the precious metal. It is also considered auspicious by Hindus and Jains, and plays a fundamental role in many religious ceremonies.
Mumbai-based CoinDCX last year became India's first crypto unicorn, achieving a $1.1 billion valuation after raising funds from investors such as Coinbase Ventures and B Capital Group. The company says that 70% of its 10 million users are between the ages of 18 and 34.
Data shared by rival firm WazirX tells a similar story. WazirX also has over 10 million users, and 2021 is touted as an "unprecedented year" for crypto trading in India. The company was acquired by Binance, one of the largest cryptocurrency exchanges in the world, in 2019.
According to a recent company report, more than 65% of its users are under the age of 35, and it has seen "a 700% increase in the number of participants from smaller cities such as Guwahati, Karnal, Bareilly, leading to increasing interest." Indicates rural and semi-urban areas."
Pritish Kumawat, a crypto trader from a small town in the western state of Rajasthan, said he now finds talks about cryptocurrencies in almost every tea shop in his area. Often, the most engaged participants are college students, he said, adding that the massive spike in bitcoin last year added to the frenzy in India.
In November, bitcoin was trading at a record high of $68,990, but has since dropped to around $43,000. The WazirX report states that apart from bitcoin, meme currencies like Dogecoin and Shiba Inu are also popular among Indians.
Apart from investors from smaller cities, both companies saw a more than 1000% increase in the number of female users on their platforms, albeit on a smaller basis.
Gupta said crypto participation by Indian women has seen a "massive jump" over the past 18 months and is "very high relative to the equity markets, quite healthy."
The company's data shows that 15% of their total users are women – which is also a global trend.
On-again, off-again relationship
There is growing enthusiasm for crypto in India despite the country's on-again, off-again relationship with digital currencies.
Central banks have long expressed concern that cryptocurrencies could be used for money laundering and terrorism financing. A secretly worded proposal posted on the website of the Indian Parliament last year also suggested that the government was exploring a plan to "ban all private cryptocurrencies in India".
However, the beginning of the year turned out to be more encouraging for the enthusiasts. Earlier this month, the Indian government announced that it would impose a 30% tax on income from virtual digital assets, which many industry experts took as a sign that crypto trading would not be banned. The government also said that it would launch a digital rupee in the coming months.
"The taxation of virtual digital assets or crypto is a step in the right direction. It gives much needed clarity and confidence to the industry," Gupta said at the time of the announcement.
Siddharth Menon, co-founder of WazirX, told CNN Business that following the announcement, their platform saw a more than 50% increase in daily sign-ups. He also noticed the growing interest among Indian developers and other professionals to join the crypto industry.
"I've been getting LinkedIn messages from senior executives in India who are now more optimistic about the business," he said. In the past, Indian exchanges have struggled to hire and retain experienced people due to the lack of clear regulations.
But the Indian government soon spoiled the mood by clarifying that cryptocurrencies are not yet legal in the country.
"I am not doing anything to legitimize or restrict or legitimize it," Finance Minister Nirmala Sitharaman said in Parliament, days after the tax rate was announced. "Whether or not to ban will come later... but I will tax because it is a sovereign right."
“I think the government is not entirely sure what it wants to do from a policy perspective,” said Anirudh Rastogi, founder of Ikigav Law, a tech law firm that works with crypto exchanges in India.
“It knows where it wants to land broadly. It wants to find the right balance where it is not disconnected from global advances in blockchain and other technology, but it also wants to address concerns about cryptocurrency.”
Rastogi said an "extraordinarily high" tax on crypto is a short-term fix, which will also act as a deterrent for many investors.
"This rate is typically used to tax activities that are not considered economically productive, such as lotteries," he said. “So this could be a sign that the government wants to make revenue, but it does not see crypto trading as economically productive.”
For equities, India applies short-term capital gains tax of 15% if shares are sold in less than one year, and 10% if sold after one year.
Gupta is hopeful that the government will make up its mind soon. He added that India, with its huge pool of developers and enthusiastic young population, could be a "superpower in the next five to 10 years" in the cryptocurrency and blockchain industry.
“What is missing right now is a clear regulatory framework,” he said.