Since the Supreme Court of India overturned the central bank's decision to stop providing banking services to cryptocurrency users, adoption has grown remarkably.
Like Ghana, Argentina and the Philippines, the second most populous country in the world is now among the emerging markets that have been showing records of Bitcoin P2P transactions, with the instability of the local currency being one of the main factors for this growth.
For some Indian investors, investing in Bitcoin was a safe option to store their wealth and minimize the uncertainties caused by demonetization and a possible ban on gold.
The withdrawal of restrictions that had been imposed by the Reserve Bank of India, which had ordered financial institutions to avoid working with cryptocurrency-related companies, appears to have triggered pent-up demand, which is identifiable by the increase in volumes on P2P exchanges, such as Paxful and LocalBitcoins.
In 2016, India underwent demonetization, when the prime minister invalidated 86% of the money in circulation without warning, asking the Indians to deliver 500 and 1,000 rupee notes.
This arbitrary change encouraged Indians to use services like Google Pay and familiarized Indians with digital transactions and also learned the value of having Bitcoins.
With such measures, like other countries that are going through similar situations, India has shown exponential growth in cryptocurrency trading volumes.
P2P trading volumes in India have skyrocketed since the country's Supreme Court lifted banking restrictions on foreign exchange in March.
According to Coin Dance's Paxful and LocalBitcoins volume data, India's Bitcoin peer-to-peer trade volume reached a historic record in July.
Bitcoin trading at Paxful and LocalBitcoin, taken together, exceeded $ 4 million, beating the previous record of $ 2.9 million in December 2017.
Many Indians convert their INR into Bitcoin and then into US dollars using these two platforms
According to the OKEx report, there are three main factors for this growth:
Remittances: The number of remittances by Indian immigrants has been the highest in the world over the years. The country had more than 17 million immigrants in 2019, and as international transactions traditionally involve high fees, the use of Bitcoin or other cryptocurrencies as an international payment method becomes much more advantageous for Indians who can save a lot in fees.
Indian rupee instability and strong demand for US dollars: the value of the Indian rupee is not stable, especially during the Covid-19 epidemic. The exchange rate between the rupee and the dollar continued to rise, depreciating the Indian currency, leading people to seek to convert the rupee into a more stable currency. However, due to strict exchange regulations, it is difficult to convert rupees directly into US dollars. Thus, most Indians use LocalBitcoins and Paxful to convert it to Bitcoin and then to US dollars. The rupee currently suffers from an annual inflation rate of 9.66%, which is considerably higher than its average annual inflation rate of around 4.72%.
Regulatory environment: Until the beginning of March this year, India had an imposition that prohibited banks from doing business with Bitcoin and cryptocurrency companies. However, this has changed and the Reserve Bank of India (RBI) recently confirmed that there are no longer any banking bans for exchanges, companies or traders, which has contributed to the increase in cryptocurrency-related turnover.
In addition to these three reasons, there is another one that is also very strong. India today has a huge population of unbanked people. This is because approximately 190 million people do not have access to financial services.
Cryptocurrencies have increasingly proven to be a way out and representing freedom for the population of countries in situations similar to India.
The following infographic shows universal access to financial services in 2020. 2 billion people do not have access to accounts for transactions. In India, 20.6% of the population is financially excluded.
India, like Argentina and Venezuela, is an example of a country where crypto has been seen as a way out against the depreciation of the local currency. These markets have great potential and importance for the future of cryptoeconomics, with Bitcoin representing a great opportunity for inclusion and financial freedom.
Thanks to the expansion of new technologies that increasingly allow people to have access to the internet in different areas, such as rural areas, it is possible that more people will know the freedom that cryptocurrencies represent. Increased access to the internet and mobile devices, as is happening in India, can truly signal the start of a major adoption cycle. Soon, the population of many other countries will recognize the benefits of using cryptocurrencies, thus expanding the adoption of this great monetary and social innovation.