Crypto at the Top of the Mind
On June 8, 2021, one of the smallest countries in Central America, El Salvador, took a big step of making the Bitcoin, a crypto currency, legal tender in the country – the first country to do so globally. This shows the growing clout of crypto currencies. Even, in India, crypto currencies have seen an exponential increase in interest ever since the Reserve Bank of India ban was lifted in March 2020. India has the highest number of crypto owners in the world at 10.07 crore, according to broker discovery and comparison platform Broker Chooser. Compare this with the total unique client codes registered with BSE, which is around 8 crore.
Another example which shows that crypto currency is at the top of the mind of Indian investors is humongous addition of users with crypto exchanges. A couple of crypto exchanges have already overtaken India’s largest stockbroker, Zerodha, in terms of number of users. This meteoric rise in virtual currency has led the government to get into the action mode. It is likely to table ‘The Crypto Currency and Regulation of Official Digital Currency Bill, 2021’ soon. This will lay down the regulatory framework for interaction of crypto currencies with financial markets and will also detail the rules of the game so that regulatory authorities such as RBI, SEBI and tax authorities have better legal guidance.
What does all this mean for investors, especially looking at the heightened volatility of such digital currencies? In one our stories we have analysed this new asset class in detail and how they interact with other asset classes. The story goes into detail and explains if it makes sense to invest funds in such a form of digital currency. El Salvador, which gets 24 per cent of its GDP as remittances, made Bitcoin as legal tender to save on huge fees its citizens pay while repatriating cash from other countries. Hence, as an investor you should consider this as an exception rather than a law and assess your risk appetite before making it a part of your portfolio.
SHASHIKANT