Indians who are known to traditionally invest in gold, have found a new obsession -- cryptocurrency. In India, where households own more than 25,000 tonnes of gold, investments in crypto grew from about $923 million in April 2020 to nearly $6.6 billion in May 2021, according to Chainalysis. This represents a 612% increase over the time period listed.
This surge in investments comes despite the Reserve Bank of India's aversion towards digital currency. In 2018, the RBI banned banks from supporting cryptocurrency transactions after digital currency frauds were reported. However, the Supreme Court struck down the ban in March 2020, prompting the central bank to notify that its earlier order has been reverted.
Despite this, many investors moved from gold to crypto. A 32-year-old entrepreneur Richi Sood has put in over $13,400 into Bitcoin, Dogecoin and Ether since December. She did cash out when Bitcoin crossed $50,000 in February but bought into the recent dip, Sood told Bloomberg.
Sood is one of the many -- around 15 million and growing -- Indians who are buying and selling digital coins. It is catching up with US’ 23 million and has far surpassed the UK's 2.3 million. Driving this run is the 18-35 year group. In line with this is the latest World Gold Council data that indicates that Indians under age 34 are less inclined to buy gold, as compared to older consumers.
Nevertheless, regulatory uncertainty is the biggest barrier. Despite Supreme Court’s quashing of RBI’s 2018 order, authorities have shown no signs of embracing cryptocurrencies.
Some investors are also concerned about the lack of taxation rules for cryptocurrencies. One investor said that with no income tax rules at present, he is worried about retrospective tax and even raids if it becomes publicly known that he is a big-ticket crypto investor, said the news site. If a ban is imposed, then he plans to move his trading to an offshore account in a Singaporean bank.
It must be mentioned that the value of Indian digital asset holdings is only a sliver of the gold market. The growth, but, is clear. The four biggest crypto exchanges saw daily trading jump to $102 million from $10.6 million a year ago.
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