The Future of Cryptocurrency: An Upbeat Donald Trump Is Good News For The Industry, But India Still Faces THESE Challenges
Trump stated that if re-elected, the US will become a Bitcoin superpower, with the Republican Party creating clear regulatory guidelines to support the industry
Updated: Jul 31, 2024, 20:04 IST
Former US President Donald Trump has reignited interest in cryptocurrencies by promising a revolution if he returns to power. Trump stated that if re-elected, the US will become a Bitcoin superpower, with the Republican Party creating clear regulatory guidelines to support the industry. One of his key proposals includes creating a strategic national Bitcoin reserve.
Trump's announcement is expected to boost Bitcoin, but many still view cryptocurrencies as unstable investments. Prior to Trump's promises, the US government had already taken steps to strengthen the sector. The Securities and Exchange Commission (SEC) approved Bitcoin exchange-traded funds (ETFs), marking a significant milestone. This move could attract new investors who were previously hesitant about the complexities of buying Bitcoin.
Market Analysts and SEC Approval
Market analysts praised the SEC's decision, seeing it as a major validation for the cryptocurrency industry. While the US is progressing in the crypto space, it still lags behind traditional financial investments in acceptance. Wider adoption is likely to increase with regulatory clarity from other countries.
The Rise of Cryptocurrency
Cryptocurrencies emerged after the 2008 global financial crisis, which was exacerbated by the bankruptcy of US investment bank Lehman Brothers. This crisis led to the creation of a new class of digital assets, with Bitcoin, the first cryptocurrency, appearing just two months after Lehman Brothers' collapse. The appeal of these new currencies lies in their decentralization, allowing peer-to-peer transactions without relying on traditional central banks. Despite this appeal, some investors remain skeptical. However, since 2009, the adoption of digital assets has grown rapidly.
The Indian Dilemma
India has had a complex relationship with cryptocurrencies. While the bull run in foreign markets attracted Indian investors to digital assets, the government's high taxes have been a deterrent. 2021 was a landmark year for cryptocurrencies in India, but the market downturn in 2023 and the introduction of a 30% tax rate along with a 1% TDS (tax deducted at source) in 2022 have slowed growth.
Impact of TDS on Indian Markets
The TDS on securities transactions led to a dramatic drop in trading volumes on Indian exchanges, declining by over 95%. This sharp decline was because Indian investors moved their trading activities to offshore platforms to avoid higher taxes. According to a report by the Esya Centre, an estimated three to five million Indian traders switched to foreign exchanges, resulting in a significant loss of $3.8 billion in trading volume for domestic platforms.
The Opportunity in Crypto
India urgently needs clear crypto regulations to sustain growth in trading volumes. The crypto industry in India was hopeful that recent budget announcements would bring necessary changes. However, stringent tax policies have hindered progress. India is at a critical juncture with nearly 900 crypto-focused startups, but regulatory uncertainty has led to a significant brain drain, with talent and companies moving abroad for better opportunities.
Despite the challenges, the interest in crypto remains strong. The rapid growth of Bitcoin ETFs, surpassing even gold ETFs, highlights the increasing global interest in digital assets. Experts believe that 2024 could be a pivotal year for India's crypto industry, with high hopes that the G20 deadline for crypto regulation will drive action. To unlock the potential of cryptocurrencies, issues like unstable banking relationships and complex tax structures must be addressed. While skepticism persists among investors, the potential rewards are significant.
