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Eat, Pray, Love: India’s Latest Infatuation with Crypto

Exclusive Research

  • Indians have taken a liking to cryptocurrencies like never before, pushing the country to the number two spot in the Chain Analysis 2021 global crypto adoption index.
  • Investments by Indians in cryptocurrencies topped $6.6bn after a six-fold increase year-on-year.
  • Endorsements from celebrities and the absence of proper regulation make the crypto landscape look sunny with rainbows and butterflies.
  • Should the government enforce more stringent regulations, dark clouds could soon follow.


With a predominantly young and tech-savvy population, it is no surprise that India is a hotbed for the crypto industry. The past year has seen investors rushing to the asset class and crypto startups booming all across the country. India is slowly making its crypto footprint on the global scale, producing prominent projects such as Polygon Network and exchanges such as CoinDCX, backed by Coinbase Ventures.

Adoption has just begun and the potential for growth remains massive, given the county has a population of 1.3bn people. While this growth has given cryptocurrency exchanges in India a reason to celebrate and attract funding from global investors, the boom is taking place in the absence of clear guidelines from the central bank or the government. As such, this dangerous flirtation warrants caution, given the previous stance taken by the Indian government on cryptocurrencies.

Eat with the Celebs

In India, celebrities, especially movie actors and cricket players, are considered God-like. They often have large fan followings, whose passion and loyalty is so fierce, that they tend to believe just about anything the celebrities endorse with blind faith. To capitalize on this loyalty, several cryptocurrency exchanges in India have partnered with celebrities across social media, sports, and Bollywood to market cryptocurrency investments. These campaigns often have celebrities encouraging youngsters to invest in this alternative asset class. Furthermore, many of these campaigns employ clickbait strategies, such as sign-up bonuses, that can be redeemed after placing a few trades. The convergence of these marketing strategies and the blessings from the celebrities have been a big contributor to the popularity of crypto in India.

On the flip side, while cryptocurrencies may be the future, for a large majority of the population (including many of these fans), it is not yet a meaningful part of their daily lives. Since most of the marketing campaigns do not properly disclose the risks associated with investing in cryptocurrencies, it could leave millions of uninformed investors vulnerable to potentially life-wrecking situations. Not to mention that there have been instances of fraudulent clickbaiting. Promoting cryptocurrencies without any regulatory scrutiny can end badly for all parties.


Pray to the Regulators

There seems to be no clear indication from the Indian government as to which position they intend to take on the emerging asset class. In fact, they have been flip flopping and their recent stance is one encouraging the growth of the crypto industry.

Back in 2018, with little warning, India’s central bank put restrictions in place that prevented banks from engaging in cryptocurrency transactions. This decision was short-lived, however, as it was quickly reversed by the supreme court. As a result of this push and pull, investors largely stayed away from making massive bets and only had enough confidence to dip their toes into crypto investments.

More recently, the Reserve Bank of India (RBI) took a more moderate stance and issued a statement advising banks not to cite its 2018 circular for denying services to cryptocurrency platforms or investors. The RBI’s regulatory move may be a sign of pulling away from a blanket ban, but there are still no proper guidelines for this emerging asset class. Cryptocurrency exchanges and investors seem to have perceived the RBI’s latest circular as a stamp of approval and a flood of investments into the space has since ensued. This is perhaps an unstinting interpretation and the extent of risks, given the scale of investments, may be damaging.

The fervour of investors remains unabated. Even as the Indian government is considering the Cryptocurrency and Regulation of Official Digital Currency Bill, which could ban all private cryptocurrencies in India and provides for the creation of a legislative framework on an official digital currency. Some believe that the delay comes as the RBI signalled it is very much in-game and is working on its own central bank digital currency like the Chinese digital yuan.

On 22 July, the Reserve Bank of India (RBI) announced that they were considering the introduction of a central bank digital currency (CBDC). A CBDC is a legal tender issued by a central bank in digital form. Essentially, it would be a digital version of the Rupee. While digital currencies issued by central banks would not be decentralized, they would undoubtedly create mass awareness. CBDCs are not only desirable for the benefits they create in payments systems, but might also be necessary to protect the general public in an environment of volatile private virtual currencies.

The introduction of a CBDC could lead to a more robust, efficient, trusted, regulated and legal-tender based payment option. While the announcement of a possible CBDC does not mean that the RBI has cemented a positive view on cryptocurrencies, it might benefit the entire ecosystem, and ultimately help more people participate.

Love thy Crypto

Indian investors may have rushed to cryptocurrencies in the hope of windfall returns, but they may be in for a pleasant surprise as this new asset class may serve a hedge against rising inflation. Indians are generally more inclined to invest in gold and land so diversifying their bets could see some real economic benefits, given the country’s fragile economy. With supply-chain disruptions sending commodity prices sky high, the threat of inflation is very concerning. Consumer price inflation has remained higher than the Reserve Bank of India’s target of 4% for most of last year. In addition, much like other nations, the Indian central bank has been focused on reviving growth in the Covid-hit economy. Managing inflation is likely not their priority in the near term. With the Indian economy slipping into recession due to the Covid-19 pandemic, the RBI printed more rupees, which led to 16.8% increase in the currency circulation(compared to 14% in the previous year). Investment in Bitcoin, the most popular cryptocurrency, could work as a hedge against inflation, thereby throwing a life raft for those who jumped on the crypto bandwagon.

With celebrities wooing the crowds and regulators looking the other way, Indians have been busy making hay when the sun shines. With investments pouring into the country’s crypto industry, many startups have flourished along with an abundance of rags-to-riches stories. While ignorance is bliss for now, when the regulatory whip is cracked, the picture could turn ugly for many. While this may be a moment of opportunity for Indians, caution should be warranted, especially for those making blind bets, if they want to end their stories with butterflies in the air.

Nothing in this article constitutes professional and/or financial advice. The content is provided exclusively for informational and/or educational purposes. Nothing is to be construed as an offer or a recommendation to buy or sell any type of asset. Seek independent professional advice in regards to financial, tax, legal and other matters.

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