Crypto in Third World Countries – India

India is ripe for adopting cryptocurrency, the large population with the tools already at their disposal should look like an obvious outcome, however, the over reliance on state approval without understanding the “censorship resistance” ethos of blockchain & cryptocurrency, will act as the biggest achilles heel. Cryptocurrency should be understood for what it is for & not merely a tradable asset, and to educate the population, responsibility lies on the true believers of the market.

How Gold is treated?

India, is the 2nd largest consumer of Gold in the world, second only to China. Culturally, gold is treated as a valuable asset which has seen tremendous price inelasticity. Mostly in the form of ornaments, due to its luster, it is held for its store of value. With the stock market penetration being about 1.5% [1], Gold is the natural choice.

Politically looking left, the government has tried & succeeded, though seldom, at curbing the consumption of gold through import tariffs, etc., it hasn’t curbed the demand. There is a distrust of fiat within the culture.

Bitcoin, though it started off with the intent of becoming a trustless, peer to peer currency, it has grown beyond its original intent & has become a store of value. It has all the attributes of Gold except real world physical application (electronic circuit boards etc.)

Bitcoin, par-se, might not find mass adoption in India due to its price & inability of masses to own any meaningful piece of it, but other similar cryptos can be successful if it meets the characteristics of bitcoin.

Censorship resistance

Tax avoidance & tax evasion is always discussed vividly among both parties to a tax. With the state also spreading its tentacles into the financial decisions of people under the guise of digitization, the time is ripe for cryptocurrency to flourish in India. Over 50% of the market [GDP] in India is unorganized [2], it is here too, where cryptocurrency will make inroads as a mode of consideration.

Mobile internet penetration & crypto adoption

India is among the top countries in the world for mobile phone adaptation. Over 750M [3] people have access to mobile phones in 2018, and about 483M [4] having access to the internet, the potential of cryptocurrency is huge. However the biggest challenge facing the Indian diaspora is the lack of risk appetite which is inherent to the culture. The participation potential in the stocks & constant seeking of comfort in Gold & bank deposits prove this.

Potential of peer-peer transactions

Many across the world, do not understand the problems of fractional reserve fiat banking system and how the financial well being destroyed by debt & inflation. Real Estate investment has largely played a role as an asset as well as an inflation hedge, however it appears there’s not much steam left in this market & has plateaued. It is common knowledge how the real estate deals happen in India & how the valuation is played with to pay less taxes & other related fee. The excess, which is paid through cash, can be paid through cryptocurrency which is where I see traction.

Another industry where I see traction is the services sector which is burdened immensely by tax & complexity of the tax code causing wealth erosion. Most times, the compliance & taxes act as entry barriers for people to engage in business activity.

Sources

[1] https://www.bloomberg.com/view/articles/2015-04-09/india-stock-rally-needs-more-domestic-retail-investors

[2] https://en.wikipedia.org/wiki/Unorganised_sector_(India)

[3] https://www.statista.com/statistics/274658/forecast-of-mobile-phone-users-in-india/

[4] https://www.statista.com/statistics/265153/number-of-internet-users-in-the-asia-pacific-region/

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