Cryptocurrency has had a turbulent history in India, experiencing rapid growth followed by strict regulatory challenges. From early enthusiasm for blockchain technology to uncertainty over its legality, the Indian crypto market has seen both significant gains and abrupt downfalls. This blog explores the rise and downfall of cryptocurrency in India, looking at the regulatory landscape, public interest, and the future of digital assets in the country.
The Rise of Cryptocurrency in India
Early Enthusiasm (2013-2017)
The rise of cryptocurrency in India can be traced back to 2013 when Bitcoin started gaining global attention. Early adopters in India began exploring Bitcoin as an alternative investment, and soon, various cryptocurrency exchanges like ZebPay and CoinDCX launched, allowing Indians to trade cryptocurrencies. Public interest started to surge as news of Bitcoin’s soaring value spread worldwide, and tech enthusiasts and investors were drawn to the potential of blockchain technology.
The Initial Boom (2017-2020)
By 2017, cryptocurrency had gained significant traction in India. With Bitcoin’s meteoric rise, more investors flocked to buy cryptocurrencies, and numerous exchanges popped up. Additionally, blockchain technology began receiving recognition, with Indian startups and enterprises exploring its potential applications in finance, supply chain management, and even healthcare.
Despite uncertainties regarding regulation, the Indian public embraced the crypto revolution. Interest was further fueled by the global trend of Initial Coin Offerings (ICOs), where many investors saw massive returns on their investments. Major global exchanges like Binance also entered the Indian market, making it easier to access a wide range of digital currencies.
Government Concerns and Market Boom
The Indian government’s concerns about the legality and regulation of cryptocurrencies began to surface in 2018, but that didn’t deter investors. With the advent of decentralized finance (DeFi) in 2019 and the overall growth of blockchain applications, India saw increased trading volumes on cryptocurrency exchanges. By 2020, India had one of the largest markets for cryptocurrency trading globally, with a growing community of traders, developers, and startups leveraging blockchain technology.
The Regulatory Pushback: Uncertainty and Downfall
The 2018 RBI Ban
In 2018, the Reserve Bank of India (RBI) imposed a circular prohibiting banks and financial institutions from facilitating cryptocurrency transactions, creating a massive roadblock for the market. Indian exchanges were forced to halt operations as banks withdrew their support, causing panic among traders and investors. The market’s growth came to a standstill, and many investors feared their assets would be frozen.
However, during this period, the community didn’t give up. Peer-to-peer (P2P) exchanges emerged as alternatives, allowing people to trade cryptocurrencies without directly involving banks. While the ban deterred casual investors, the more committed crypto community continued trading through innovative solutions.
Supreme Court Lifts the Ban (2020)
In March 2020, the Supreme Court of India overturned the RBI ban on cryptocurrency trading, stating that the ban was unconstitutional. This ruling sparked a revival in the crypto space in India, leading to a resurgence in trading volumes and new investments.
With the ban lifted, several cryptocurrency exchanges relaunched their services. CoinDCX and WazirX, two of India’s largest crypto platforms, reported a significant increase in user registrations and trading volumes, signaling that the Indian public was still very much interested in digital currencies. As a result, the market began to grow again, with hopes of full legalization on the horizon.
The Shadow of Regulation (2021-2023)
Despite the victory in the Supreme Court, the Indian government remained cautious about cryptocurrency. Throughout 2021, there were multiple reports of potential legislation that would either ban or heavily regulate cryptocurrencies in the country. This uncertainty led to confusion among investors, with many fearing that a total ban was still possible.
In 2021, the Indian government introduced a draft of the Cryptocurrency and Regulation of Official Digital Currency Bill, which proposed the creation of a government-backed central bank digital currency (CBDC) and the banning of private cryptocurrencies. This caused significant unrest in the market, leading to a sharp decline in trading volumes.
Adding to the pressure, global regulatory trends around cryptocurrency and a rise in crypto-related scams forced the Indian government to reconsider its approach. The government implemented a flat 30% tax on gains from cryptocurrency trading in 2022, which further dampened enthusiasm and pushed casual investors away.
The Downfall of Cryptocurrency in India
Regulatory Crackdowns (2022-2023)
The introduction of a harsh tax regime in 2022, coupled with ongoing speculation about a blanket ban, stifled the growth of cryptocurrencies in India. Many exchanges saw a decline in trading activity, as high taxes and regulatory uncertainty made it difficult for users to continue engaging with the market. In addition, many young investors and startups turned their attention to safer, more traditional investment options.
Despite the regulatory restrictions, there were still a dedicated few who believed in the future of crypto and blockchain technology. Indian blockchain developers continued to contribute to global projects, and some cryptocurrency enthusiasts turned their attention to global decentralized finance (DeFi) projects or moved their activities to international exchanges.
Shift Toward CBDC (2023-2024)
The Indian government, in an effort to balance innovation and control, shifted its focus toward the development of a central bank digital currency (CBDC). In 2023, the RBI launched pilot programs for a digital rupee, signaling the government’s interest in exploring blockchain technology while maintaining strict control over digital assets. This move marked a significant shift away from private cryptocurrencies toward a state-controlled digital currency ecosystem.
As of 2024, while interest in cryptocurrencies has waned due to regulatory pressures and taxes, the Indian government is pushing the use of its CBDC, potentially signaling the future direction of digital currency in the country.
The Future of Cryptocurrency in India
The future of cryptocurrency in India remains uncertain. While the rise of blockchain technology and decentralized finance still holds potential, the government’s stance on private cryptocurrencies could remain a significant obstacle. However, the success of India’s CBDC pilot programs may determine the future trajectory of digital assets in the country.
The evolution of India’s crypto market depends heavily on how the government chooses to regulate, tax, and manage digital assets. For now, crypto enthusiasts continue to monitor developments, hoping for a balanced regulatory framework that supports both innovation and investor protection.
Conclusion
The rise and downfall of cryptocurrency in India is a testament to the volatile and uncertain nature of this digital asset class. While crypto once enjoyed rapid growth in India, the regulatory landscape has significantly slowed its momentum. As India looks toward a future with central bank digital currencies, the question remains whether private cryptocurrencies can coexist alongside state-backed digital assets. For now, the crypto market in India is caught between innovation and regulation, with its future hanging in the balance.