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Virtual currency bitcoin (REUTERS)
Virtual currency bitcoin (REUTERS)

Bitcoin gap is a potential hurdle to India’s growth

By the time Indian companies and individuals get the regulatory certainty they need to start buying bitcoin in larger sums, will the price be so high that they will only be able to afford a fraction of what they could buy today?

In 2020, a number of public companies such as Square and MicroStrategy made headlines for buying large amounts of bitcoin to hold as a reserve asset. No Indian company has done so yet. As bitcoin ownership grows in the US, the European Union, Japan, South Korea and even China, many Indians are watching and wondering when their turn will come.

By the time Indian companies and individuals get the regulatory certainty they need to start buying bitcoin in larger sums, will the price be so high that they will only be able to afford a fraction of what they could buy today? And who will Indians buy it from?

How much bitcoin do Indians own? According to current estimates, roughly 5 million Indians own or have owned bitcoin or other crypto assets. By extrapolating from the volumes on ZebPay and our partners in the Indian crypto industry, we can estimate the maximum amount in Indian wallets.

Our best guess is that Indians own less than 1% of the world’s bitcoin. We can say for sure that Americans own much more than 1% of the global supply. The same is true for the EU, Japan and China. There will soon be long-term haves and have-nots in bitcoin. India has a chance to join the haves, but time may be running out.

The usual argument against crypto is that it could be used for money laundering or other illegal activity. Blockchain analysis firm Chainalysis, a global leader and adviser to several governments, reported that illicit activity accounts for only 1% of all bitcoin transactions. As the US Department of Treasury has confirmed, the dollar is still by far the criminal’s favourite.

The risk of some illicit activity has to be weighed against the larger risk of being left out of what may well become a blockchain economy in the coming decades.

Innovations

Recently, the World Economic Forum and blockchain company Chainlink published a report on integrating traditional infrastructure with blockchain technology.

By integrating blockchain into the Pradhan Mantri Fasal Bima Yojana, India could provide crop insurance to millions of farmers with lower cost, better coordination, and greater transparency and accountability.

This is just one example of the hundreds of crores of economic potential waiting to be unleashed if India can close the bitcoin gap and give its citizens access to blockchain and crypto with healthy regulation that ensures both safety and innovation.

Can we have just blockchain without cryptocurrencies? Not really. Crypto tokens are the units that allow the blockchain to function. By investing in a project’s crypto token, people power (often literally, by paying for the electricity) the innovation that the project is trying to achieve.

Across India today, hundreds of innovators are working on blockchain-based solutions to some of the nation’s most pressing problems. They could lower costs, reduce corruption, increase inclusion and create jobs.

Nothing is more essentially Indian than innovation. By closing the bitcoin gap and creating healthy regulation that promotes innovation and protects citizens, India can gain a long-term economic advantage.

As told to Neil Borate by Vikram Rangala, chief marketing officer at ZebPay

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