India: Crypto-regulations, adoption will come, but can they bridge the digital divide?

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Beowulf’s remark, “Do not grieve, wise warrior,” in the epic poem in Old English seems to make sense in the Indian crypto-context.

The winter session of the Indian Parliament ended without any cryptocurrency bills being put forward. Additionally, the government has yet to confirm whether the proposed cryptocurrency regulation is expected to be presented at the next session of parliament. However, despite the delay, the crypto-warriors did not surrender. They have great hopes and no despondency is in sight.

Now, it should be noted that India ranked second on a list of 20 countries with the highest cryptocurrency adoption rate, according to Chainalysis. While India’s march towards crypto developments looks appealing, the widening digital divide remains a major concern.

Notably, India has the second largest internet user base in the world with over 560 million subscribers. It also has the lowest mobile data prices offered anywhere. Despite this, for every Indian citizen with an Internet subscription, there is a citizen of a rural area who does not.

According to DataBank, India’s rural population was 65.07% in 2020. A significant percentage of the country’s population lives in areas with minimal internet access. Even local journalists have often spoken about this issue.

The problem of the digital divide in India is very real. My team and I visited Dharavi to find that over 500 Chhatrapati Shivaji Vidyalay students are unable to prepare their counseling due to lack of access to smartphones.

Watch the story here: https://t.co/QJf4BniXyk

– Faye DSouza (@fayedsouza) March 11, 2021

The relevant question here is therefore: what can bring about a profound change?

Say “hello” to the agent of change

Well, cryptocurrencies have not only rocked the financial world, but they are also changing the cultural world. Speaking exclusively to AMBCrypto, WazirX CEO Nischal Shetty said:

“Crypto has enormous potential to transform the world as we know it and can improve the financial inclusion of the unbanked. It can also create new income opportunities for Indians across the country. It can also help young people in this country find more jobs.

Against this background, it can be seen that the adoption of cryptography can perhaps neutralize the digital divide to some extent. Consider this: The penetration of Facebook use in India increased exponentially between 2017 and 2021. According to Statista, over 25% of Indians were Facebook users in 2020.

However, the penetration of the social networking site is expected to reach 60% by 2040. Notably, a significant portion of its users are from rural areas.

Source: Statesman

Interestingly, FOMO has been observed to encourage many people in rural areas to use Facebook. In fact, some of them discovered the Internet through Facebook. So to speak, Facebook has unknowingly tried to bridge the gap between those who have easy access to the Internet and those who do not.

Take the case of a grade 11 student from rural Uttar Pradesh. Recalling his past experience of being featured on Facebook for the first time, he said (a rough translation),

“It was in 2017 that I heard my friends talk about something where they could chat, play games and connect with a lot of people. At the time, I didn’t have a television at home. I was also not blessed with much privilege. But, as a child, I was intrigued. I remember being introduced to this internet world because of Facebook. From knowing nothing about the digital world to attending live lessons, I have seen a huge change.

It wouldn’t be unfair to ask why the Facebook story is being discussed. Well, that serves as an example of how infatuation can sometimes facilitate growth. Likewise, it appears the crypto craze this time around to tackle the existing problem of the digital divide.

Where is the crypto craze?

Oddly enough, crypto adoption is booming in semi-urban and rural areas of India despite a persistent regulatory deadlock. Needless to say, the internet has played a major role.

Nischal Shetty, CEO of Binance-owned Indian cryptocurrency exchange, WazirX, sounded a bullish bugle on crypto adoption. He nods,

“The influx of cheaper and faster internet coupled with steadily declining smartphone prices has led to rapid internet penetration in semi-urban towns and rural towns of India. Coupled with the lockdown induced by the pandemic, it has further accelerated digital adoption in these regions. Additionally, it has also been the biggest driver of crypto adoption in India as it has led people to try and find new ways to make money online and diversify their portfolios.

Obviously, what the internet has done for information, digital currency does for money. It revolutionizes transactions and eliminates the need for a third party. Hardly a week goes by without cryptocurrencies dominating the news cycle in India.

In fact, the WazirX cryptocurrency exchange revealed that its user base has grown more than 10-fold this year to reach 10 million. The company saw a 2,648% growth in user registrations in Tier II and Tier III cities – in other words, the major cities in the country except for the six largest: Mumbai, Delhi, Kolkata, Chennai, Bengaluru and Hyderabad.

According to the same, the strong user growth was also supported by massive adoption by women in level II and level III cities.

Interestingly, Indian celebrities have also jumped on the crypto bandwagon. Additionally, to the surprise, CoinDCX and CoinSwitch Kuber spent over Rs 50 crore collectively on sponsorship deals during the ICC T20 World Cup. Meanwhile, crypto ads have skyrocketed.

This, in fact, has forced the government to pay close attention to space in India. Discussions on the Cryptocurrency Bill and the Regulation of the Official Digital Currency Bill, 2021 have started to surface, with ambiguity taking the lead. Moreover, Prime Minister Narendra Modi also expressed his opinion in this regard.

Take for example cryptocurrency or bitcoin.

It is important that all democratic nations work together on this matter and make sure this does not fall into the wrong hands which can spoil our youth: PM @narendramodi

– PMO India (MPMOIndia) November 18, 2021

Word of caution

While the industrial revolution was a marathon, the digital revolution is proving to be a sprint. According to a survey conducted by consulting firm Kantar, 19% of urban Indians intend to invest in virtual tokens within the next six months.

So the journey to crypto-enlightenment and bridging the digital divide – does it even sound doable? Well, Sharat Chandra, blockchain expert and emerging tech evangelist, has some strong opinions on this. According to him,

“Financial literacy combined with digital literacy is necessary to promote awareness of this new asset class. Mutual funds have been made popular by campaigns called “Sahi Hai Mutual Funds”. Crypto entities should spend time and effort educating investors rather than splurging on celebrity referrals. “

Cyber ​​experts have often pointed out that cryptocurrencies are mainly used on the darknet for terrorism and drug trafficking purposes. These digital assets pose a serious threat to national security and a big challenge for security agencies in India, they say.

Even so, the government’s plan to put in place regulations is a respite for many. In this context, Sharat Chandra added,

“Legislation, whatever its intention, invites criticism, and those who like the status quo will continue to oppose it. The crypto bill needs to be substantiated and fears associated with money laundering and terrorist financing can be allayed by taking a global collaborative approach. Guidelines suggested by bodies such as the FATF (Financial Action Task Force) on travel rules may address concerns related to the illicit use of crypto.

And There you go!

Narrowing the digital divide and embracing crypto may seem like programmed rhetoric to many. However, it should also be noted that “the information asymmetry associated with cryptography is compounded by the deep digital divide that exists in our country. People in Tier 2 and Tier 3 cities and even villages are heating up with crypto, oblivious to the risks involved, ”according to blockchain expert Sharat Chandra.

As India looks forward to crypto bills, it would be interesting to see how crypto regulations play out against the backdrop of the existing digital divide.

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