Bitcoin boom? Trump brings DeFi back in game, but India is crypto-hesitant

“Global currency reset,” the buzzword in the financial markets, predates the US electorates opting for Donald Trump as their president. After Trump’s election victory, the new DeFi (decentralised finance) currency regime is gaining momentum with a slew of announcements that give credence to Trump’s campaign commitment to crypto.

Emerging from the shadows over the past two years, cryptocurrencies and, to a certain degree, digital national currencies are gaining traction due to lower administration costs, ease of delivery, and instant transfer.

Pre-poll controversy

The pre-US election controversy around decentralised cryptocurrencies like the Bitcoin now extends over the future of e-currencies issued by the national central banks of each country. Trump, during his election campaign, voiced opposition to Central Bank Digital Currencies (CBDCs). He views them as curbing individual freedom and an outright attack on the privacy and sovereignty of US citizens.

He has spoken in favour of Bitcoin transactions, and a 'Crypto Czar' appointed by him will frame a policy framework that could consider elevating the crypto to the status of an asset like gold and making it a federal reserve currency.

A lot has happened in a span of less than a month after Trump's election win, bolstering the credibility of the much-reviled cryptocurrency, including a $30-million investment by China-born crypto entrepreneur Justin Sun in Trump’s World Liberty Financial.

Also read: How a US-based Indian techie was duped of Rs 4 crore in 'pig butchering scam'

India’s ambiguous stand

As the crypto-storm brews, gaining momentum to take the world financial system by storm, how prepared is India for the bitcoin takeover?

India’s stance on the currency is ambiguous at best. Bitcoin is legal in India, but it’s not recognised as legal tender for transactions. Bitcoin is also subject to taxation in India.

At present, India neither prohibits nor allows investment in the cryptocurrency market.

Over the past few years, there have been discussions about introducing a cryptocurrency bill in Parliament, which could potentially ban or regulate private cryptocurrencies. However, as of 2024, no such bill has been passed.

The Reserve Bank of India advises that it has not given any licence/authorisation to any entity to operate such schemes or deal with Bitcoin or any virtual currency. As such, any user, holder, investor, trader, etc. dealing with virtual currencies will be doing so at their own risk.

A jungle that few dare to explore

At the micro level, crypto at present is a jungle, one that is churning out precious ivory for those that dare to venture, burning a few as is the wont with any unregulated market mushrooming its scamsters.

A good number of Indian consumers are already knee-deep in Bitcoin transactions. It is estimated that 97.5 million people, 7.1 per cent of India’s total population, currently own cryptocurrency.

Since last year up to now, the Bitcoin has witnessed a 162.9 per cent increase in its value. So, what has powered this value?

Also read: FOMO on crypto? Here’s what you should know before you make the leap

Limited supply

“The profit margins are huge in intraday trading of Bitcoin. I could buy at one lakh rupees and sell at two lakhs," said Delhi Bitcoin trader Jai Singh. "The steep rise in Bitcoin value is attributable to its limited supply. The creator of the Bitcoin limited the total supply to 21 million coins, and so, every four years, the Bitcoin mining block automatically halves.

"Nineteen million have already been mined. By around 2140, all Bitcoins will be mined. The built-in halving mechanism ensures that no more Bitcoin will be minted once this limit is reached.”

Crypto trader Dinesh Kukreja, CEO, Unicash Digital, said: “From Rs 35 lakh just two months back to around Rs 83 lakh as it stands today, the Bitcoin is a spectacular witness of tumultuous growth on the back of an unprecedented intersection of politics and business interests as reflected in the partnership of Trump and Elon Musk whose companies Tesla and Space X hold substantial bitcoin holdings.”

Musk-Trump promise

There is unanimity that the US President elect’s promise to make America the Bitcoin capital of the world along with Musk’s conviction in a new digital currency financial ecosystem has given legitimacy and strength to the crypto.

The bet in the markets is that in five months’ time, the Bitcoin will touch Rs 150,00.

However, due to the lack of its legal status and a non-existent regulatory framework, many a customer has suffered great losses without any redress window available.

A risky venture in India

Amit Dubay of Angel One Bitcoin trading company says that even the apps used to buy and sell crypto are not secure.

“There have been instances of exchanges being hacked. In India, too, exchanges have been hacked," he explained.

"But, due to the lack of regulation, the customer is the biggest loser. Even crypto apps have been hacked. The crypto app sometimes shuts down, blocks you out and you lose all your money. A friend of mine lost Rs 50,000 because the app suddenly shut down. People have suffered, but it’s like an addiction. From hundred dollars in 2011 to its present value of around 83 lakhs and anticipated big bull run in 2025 to over a crore and a half, the profit margins are amazingly unparalleled,” he added.

Also read: How India’s largest crypto theft of $230m was carried out

Despite its value-backing being just a computer algorithm, a computer code, the total value of cryptocurrencies in just 15 years exceeds $1.5 trillion. The global M1 supply, which includes all the money in circulation plus travellers’ checks and demand deposits, like chequing and savings accounts, was $48.9 trillion as of November 28, 2022, according to Visual Capitalist. That publication estimated the total value of the M2 supply to be $82.6 trillion.

Increasing legitimacy

Though many traders attribute it to Bitcoin’s supply-demand tension and inability to increase supply unlike the fiat currencies — the cause behind an escalation in Bitcoin value — simultaneous market moves by big players like financial institutes, fund companies, and governments are giving legitimacy to the digital currency.

Just last week, the Times, a UK newspaper, reported that a UK pension fund is allocating assets to Bitcoin, sparking a debate over the suitability of the cryptocurrency for retirement funds. UK pension specialist Cartwright didn’t provide the name of the scheme set to invest in Bitcoin, but said that between 2 and 3 per cent of the unnamed scheme’s assets will be allocated to Bitcoin.

Meanwhile, a US Securities and Exchange Commission (SEC) filing has revealed that the pension fund for the US state of Michigan has become the first such fund in the US to invest in Ethereum ETFs, investing over US$11 million in two grayscale managed funds.

Also read: RBI Governor: Cryptocurrencies huge risks to financial, monetary stability

Big win in US

On November 24, 2024, the crypto traders’ lobby won a significant victory when a Texas Federal Court overrode an earlier ruling, extending the SEC jurisdiction to include crypto dealers. The ruling came in response to the Freedom Alliance of Texas and the Blockchain Association suing the US SEC over the so-called Dealer Rule.

The CEO of the Blockchain Association, Kristin Smith, said in a statement that the ruling is a victory for the “entire digital asset industry.” He added, “The Dealer Rule was an attempt by the SEC to advance the agency’s anti-crypto crusade, unlawfully redefining the boundaries of its statutory authority granted by Congress. The agency’s overreach has been rolled back and the digital asset industry is protected from this unlawful rule.”

Coming soon: As more nations embrace crypto, traders flag lack of legal support