India on the sidelines as the future of finance dawns

In the Trumpian world, bitcoin is soaring. With Donald Trump back in office and his administration openly considering the idea of a strategic government bitcoin reserve, cryptocurrencies have been thrust into the limelight. Bitcoin, the poster child of the crypto revolution, surged past $97,000 on Thursday. That’s nearly triple its value from a year ago. But in India, investors feel more pinched than jubilant. Sell Bitcoin today, and the government takes a flat 30% cut of your profits, plus a 1% tax deducted at source.

This heavy-handed taxation reflects the government’s discomfort with cryptocurrencies. What’s more baffling still is its unwillingness to engage with the underlying technology: blockchain. To the uninitiated blockchain might sound like another tech buzzword but its essence is surprisingly simple. Imagine a ledger—a record of transactions—maintained not by a single bank or government but by a network of computers worldwide. Every transaction is encrypted, time-stamped, and added to a chain of previous transactions, forming a “blockchain.” What makes it revolutionary is its decentralization; no one controls it, and it’s nearly impossible to alter past entries, making it secure and transparent.

Blockchain is the foundation of cryptocurrencies like Bitcoin but its potential stretches far beyond speculative trading enabling tamper-proof voting systems, transparent supply chains, and decentralized finance. Yet, instead of exploring these possibilities, the Indian government has chosen to treat crypto as a speculative nuisance.

This stance looks particularly shortsighted. The United States, despite its reservations, hasn’t banned cryptocurrencies. Instead, it regulates them as securities and lets the market evolve. With Trump’s pro-crypto tilt, the US might even normalize the idea of Bitcoin as a strategic asset. Singapore, too, has adopted a forward-thinking approach, crafting regulations that encourage innovation while mitigating risks. Meanwhile, India’s regulations are so draconian that exchanges like Coinbase won’t even let Indian users buy crypto.

Krishna Jha, a veteran investor, points out that the government’s stance smacks of “nanny-state behaviour”. He notes the irony of banning crypto on grounds of risk while allowing ordinary citizens to trade in far riskier instruments like derivatives and futures.

The crux of the matter is this: cryptocurrencies are volatile and rife with speculation, as Tanuj Bhojwani, a Bengaluru-based policy expert, explains. He describes how bull markets inflate trends like NFTs and crypto gaming only for them to collapse during bearish phases. This speculative nature, while problematic, doesn’t justify India’s outright hostility.

Enter Central Bank Digital Currencies (CBDCs), the government’s answer to cryptocurrencies. Unlike Bitcoin, a decentralized asset, CBDCs are digital versions of fiat currency, issued and regulated by central banks. The Reserve Bank of India is piloting a digital rupee which promises the efficiency of digital payments with the stability of a traditional currency. But CBDCs and cryptocurrencies are not mutually exclusive. Where CBDCs provide centralized control and security, cryptocurrencies offer decentralization and financial freedom. Both have roles to play in the future financial ecosystem.

NFTs, or non-fungible tokens, are another blockchain innovation that has gained traction. To explain it simply: while Bitcoin or any other cryptocurrency is like digital cash that can be exchanged for identical units, an NFT is unique—like owning an original painting rather than a print. NFTs can represent anything from digital art to real estate deeds, providing proof of ownership in a digital format. But as Bhojwani points out, their popularity often mirrors crypto’s speculative cycles, rising during bull markets and fading during bear phases.

India’s current approach risks squandering the opportunities blockchain technology offers. Instead of fostering innovation, the government is focused on collecting taxes and issuing vague warnings. What it needs is a balanced regulatory framework that acknowledges crypto’s risks while enabling its potential. As Jha observes, smart nations don’t smother new technologies; they learn from them.

In this Trumpian world, where Bitcoin is seen as a national asset, NFTs are redefining ownership, and blockchain is reshaping industries, India risks being left behind. The future of finance is here. The question is whether India will participate or merely watch from the sidelines.