Back in the ‘90s, few could have imagined the extent to which the Internet would transform the world. For example, when Amazon – now the world’s largest retailer outside China – started as an online book seller in 1994, it’s unlikely that its first customers would have expected its offerings to expand into groceries, devices, cloud computing and streaming services.
Today, cryptocurrency finds itself in a similar position, with limited awareness of its ability to reshape the financial landscape and its capacity for positive global impact. Cryptocurrencies were invented to improve the way people create, store, and transfer value. However, they have the potential to serve the higher purpose of financial inclusion, by providing an investment and transaction option to everyone – irrespective of nationality, ethnicity, race, gender, or socio-economic class.
Touching upon all major currencies, cryptocurrencies are publicly accessible, autonomous real-time settlement assets. More recently, they have gained a reputation as programmable money – a term for real money that is represented in digital form or by tokens – for the masses. Programmable money is tracked with corresponding electronic ledgers, which are commonly known as blockchains.
Today, there are over 1.7 billion unbanked people in the world, including 190 million in India. India’s online population ranks second globally. A recent IAMAI-Kantar ICUBE report placed the tally at 622 million active Internet users in 2020 – a number that is expected to swell by 45 percent to touch 900 million by 2025. The growing base of online citizens, coupled with the subcontinent’s programs for digitization and financial inclusion, has helped consumers become more aware of and warm up to digital exchanges and cryptocurrencies.
India – An emerging adopter of cryptocurrency
Increased cryptocurrency adoption is improving financial inclusion. In a country like India, where many people are underserved by traditional financial institutions or unable to access their services, crypto finance enables them to make financial transactions quickly, cheaply and without judgment. Moreover, cryptocurrencies open up a new asset class for consumers to grow their wealth, as a form of investment.
India’s rising Internet usage and digital landscape has resulted in the popularity of cryptocurrencies growing in tandem among the masses. According to a recent report by blockchain data platform Chainalysis, India ranks second in the world in terms of cryptocurrency adoption. As per various estimates, around 15 million Indians have invested in crypto-related assets to date, with a recent survey by consulting firm Kantar noting that a sixth of urban Indian residents own cryptocurrency.
Crypto investments in the country grew more than seven-fold from $923 million to nearly $6.6 billion between April 2020 and May 2021. These developments, along with increasing rural Internet penetration, are improving financial access in the country.
How cryptocurrencies can benefit developing economies
A recent PWC report says it is highly probable that the future of money in India will be a mix of centralized, decentralized, account-based and token-based models. This would take the form of Central Bank Digital Currencies, stablecoins, and cryptocurrencies co-existing alongside traditional digital and physical currencies. Embracing cryptocurrencies will not only support India’s financial inclusion goal, but also lower the cost of processing transactions, make the world less dependent on cash, and increase the mobility of money across the globe.
For more than a decade, India has consistently been among the world’s largest recipients of remittances. As remittances often involve high fees and long waiting times for fund transfers, their operating model has key implications for developing countries like India. With their aforementioned benefits, cryptocurrencies offer a viable solution to make global remittances cheaper and faster.
India’s young population is driving crypto growth
India has a conducive environment to drive a crypto economy – a large, tech savvy population comprising millennials and Generation Z, and an abundance of tech talent adept at working with blockchain technology. This has spawned blockchain startups and led to the development of new digital currencies, with the Reserve Bank of India expected to pilot its first digital currency by December of this year.
Young Indians aged 18 to 35 are also finding cryptocurrency a better investment option when compared to gold due to the ease of process – a fact borne out by recent World Gold Council data.
With India still grappling with Covid-19, the pandemic’s impact on the economy makes financial inclusion a priority as people and businesses pick up the pieces. In the coming decades, the country may well have a much more democratized and accessible financial system. I hope India has the foresight to give cryptocurrency the consideration it deserves, in formulating the country’s plans for financial inclusion and economic growth.
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Views expressed above are the author’s own.