Indian authorities have been far from welcoming cryptocurrencies like bitcoin and see them as a vehicle for money laundering and other nefarious reasons, despite insistence by the industry that they have adopted measures to make sure that does not happen.
“Elon Musk’s $1.5 billion worth investment in bitcoin will undoubtedly offer a big boost to investors and the crypto community at large. However, the move also offers a huge testament to the potential of the digital asset which should not be ignored by the regulators and policy makers of our country,” said Sumit Gupta, co-founder & CEO, CoinDCX, which is a cryptocurrency exchange.
Tesla, in a filing on Monday, said it has invested $1.5 billion in bitcoin. It also announced that it will accept the cryptocurrency as valid payment. Its founder Elon Musk has been a fervent supporter of currencies like bitcoin and dogecoin. His tweets in support of them often fuels a rally in cryptocurrency.
Following Tesla’s disclosure, bitcoin surged 20 per cent to hit fresh highs of $47,000. It also put extra pressure on exchanges in India and abroad who faced some difficulty in processing orders as investors rushed to buy bitcoin.
“The number of users on ZebPay more than doubled right after the news. It’s a sign to other companies that bitcoin is a solid reserve asset for any balance sheet. We hope central banks will join in and that this news helps nudge the government to buy, not ban bitcoin and let every Indian do the same,” said Rahul Pagidipati, CEO, ZebPay, another platform that enables crypto trading.
Recently, the Indian government introduced a bill in the Parliament to aid the creation of sovereign digital currency by the Reserve Bank of India and ban all private cryptocurrencies. The language of the government’s description of the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, has made several stakeholders uneasy.
Now, they are rallying behind Tesla’s decision and making a case for acceptance for bitcoin and other digital currencies back home.
“This (Tesla’s move) will enhance trust for cryptocurrencies as an investment class among investors, both retail and institutional across the globe. We have seen heavy participation from institutional investors in the recent past. We, therefore, expect the government to consider these developments and come up with favourable regulations that will benefit investors and the Indian crypto ecosystem,” said Gupta.
He warned that in the wake of developed economies embracing cryptocurrencies, resistance from regulators will result in India losing out on the global technological race.
Most countries are undecided on cryptocurrency with few in favour of regulation rather than banning them outright. Christine Lagarde, the President of the European Central Bank, is one such name who has called for a global regulation of bitcoin due to its speculative nature and usage in money laundering activities.
In recent years, bitcoin and other tokens have gained wider acceptance with institutional investors indulging in trade. Many analysts are seeing bitcoin as an alternative to gold. Chris Wood, global head of equity strategy at Jefferies, recently cut exposure to the yellow metal and gave 5 per cent allocation to bitcoin in his portfolio.
“Once smart and sensible regulations are in place in the country, we will witness similar investments coming in from the institutional side which, in turn, will offer huge impetus to the economy at large,” Gupta added.
