FAQ

7.3% of population owned crypto in India in 2021: UNCTAD

Tags: Economy/Finance

According to the United Nation Conference on Trade and Development (UNCTAD) recent report “All that glitters is not gold: The high cost of leaving cryptocurrencies unregulated”, over 7.3% of India's population owned digital currency in 2021.

The report said that India stood 7th in the world in the list of top 20 global economies for digital currency ownership as a share of population.

According to the UNCTAD report in 2021, 15 of the top 20 economies in terms of the percentage of the population that owns cryptocurrencies were developing countries.

Digital Currency ownership as a percentage of population in the world 2021

1. Ukraine topped the list with 12.7%, followed by 
2. Russia with 11.9%, 
3. Venezuela with 10.3%, 
4. Singapore with 9.4%, 
5. Kenya with 8.5%, and
6.  US with 8.3%. 
7. India with 7.3%

Expansion in Crypto Currency in the world during covid pandemic 

According to the report the cryptocurrency ecosystem expanded globally by 2300% between September 2019 and June 2021 especially in developing countries. 

As per the report, there were 450 crypto exchanges operating across the globe in 2021.

Reason for expansion of crypto currency 

• In Developing countries crypto currencies were considered a cheaper and swift alternative to send remittances than the traditional channel of remittance.
• During Covid lockdown period the already high costs of traditional remittance services rose even higher during lockdown periods due to related disruptions.
•  In developing countries the cryptocurrencies are held by middle -class people. Inflation rates are high in these countries leading to depreciation in local currency. In such countries, investing in cryptocurrencies was considered a method to preserve household savings.
• People thought that crypto currencies were more stable and their prices were increasing.

Risk associated with Crypto currencies 

According to the report, cryptocurrencies can pose several risks and problems to developing countries.

•  Firstly, trading and holding cryptocurrencies can result in financial instability risks in emerging markets and developing nations. 
• Secondly, cryptocurrencies decline the actual value of capital controls in developing countries.
• Furthermore, if cryptocurrencies continue to grow as a means of payment, and even replace domestic currencies unofficially, the “monetary sovereignty” of countries could be jeopardized. 
• While cryptocurrencies can facilitate remittances, UNCTAD warned that they may also enable tax evasion and avoidance through illicit financial flows – similar to a tax haven, where ownership is not easily identifiable. 

Steps taken by India to deal with crypto currency 

• At present, India is imposing a 30% tax on income generated from the transfer of digital assets especially cryptocurrencies.
• 1% Tax Deduction at Source (TDS) is  imposed on the crypto transactions,
•  losses incurred while trading digital assets are not offset against any type of income and 
• Gifting digital assets to others is also taxable for the receiver.

Cryptocurrencies 

• A cryptocurrency is a digital currency, which is an alternative form of payment created using encryption algorithms. 
•  encryption algorithms makes it nearly impossible to counterfeit.
• The Crypto currencies are not issued by the government or central bank hence there is no regulation of the crypto currencies.  Some of the famous crypto currencies are Bitcoins, Dogecoins, Binance Coins  etc.

UNCTAD (United Nation Conference on Trade and Development) 

• UNCTAD is a permanent intergovernmental body established by the United Nations General Assembly in 1964.
• It also releases World Investment Report 
• Headquarters of UNCTAD:  Geneva, Switzerland
• Offices of UNCTAD:  New York in the United States and Addis Ababa in Ethiopia.
• Secretary-General:  Mrs. Rebeca Grynspan of Costa Rica.