Trump’s second term puts crypto centre stage — Is India ready?

As Donald Trump takes the oath of office for his second term on January 20, one of his first actions may be signing an executive order to establish a crypto advisory council. This move is expected to ease regulatory burdens on cryptocurrency companies and accelerate digital adoption in the United States.

Coinciding with Trump’s electoral victory in November, the crypto world is buzzing with excitement. Just days before his inauguration, Washington, DC’s Andrew W Mellon Auditorium hosted the first-ever ‘Crypto Ball’, a landmark event organised by David O Sacks, a former PayPal founder, and Trump’s newly-appointed ‘White House Artificial Intelligence & Crypto Czar’.

The Crypto Ball brought together top crypto leaders, tech giants, and key policymakers in Trump’s administration. Attendees, wearing red ‘Make Crypto Great Again’ caps, discussed a bold new roadmap for cryptocurrencies. The event’s success was evident, with general tickets reselling for as much as $5,000, while VIP tickets, which include a private dinner with Trump later this year, fetched up to $1 million.

Trump’s second term is already shaping up to be a game-changer for the crypto industry. By appointing a crypto czar, nominating crypto advocate Paul Atkins as SEC chairperson, and signalling that the US aims to lead in Bitcoin reserves, his administration is doubling down on its commitment to digital assets. Reflecting this renewed optimism, major cryptocurrencies, including Bitcoin, have surged by 25-30% in the weeks leading up to the inauguration.

Where does India stand?

The global financial landscape is transforming rapidly as countries embrace cryptocurrencies and blockchain technology. Switzerland has allowed Bitcoin to be used for tax payments in certain cantons. Dubai has integrated blockchain into its smart city initiatives with the launch of ‘DubaiCoin’. Singapore supports blockchain innovation through initiatives like Project Ubin, which explores blockchain use in central bank digital currencies (CBDCs) and cross-border payments.

Adopting cryptocurrencies offers far-reaching benefits, including financial inclusion, reduced transaction costs, and faster international transfers. For example, El Salvador’s adoption of Bitcoin as legal tender enabled millions of unbanked citizens to access financial services via mobile wallets. Cryptocurrencies like Ripple (XRP) are streamlining global transactions, while Bitcoin is increasingly seen as a hedge against inflation in countries like Venezuela. Blockchain technology, too, is driving innovation, as seen in Estonia’s use of distributed ledgers to improve public fund management and e-governance systems.

While the world races ahead, India’s approach to cryptocurrencies remains overly cautious. As the Narendra Modi government sets its sights on transforming the country into a $7 trillion economy by 2030, the question arises: Can India afford to stay on the sidelines as other nations leverage blockchain technology to boost innovation and economic growth?

India’s regulatory paralysis

India’s relationship with cryptocurrencies is fraught with regulatory uncertainty. In 2022, the government imposed a steep 30% tax on crypto profits and a 1% tax deducted at source (TDS) on all transactions, significantly dampening trading activity on domestic exchanges. Meanwhile, the Reserve Bank of India (RBI) has consistently voiced concerns about cryptocurrencies, labelling them a threat to financial stability while focusing on its Digital Rupee (a CBDC), launched in 2023. However, the Digital Rupee has so far failed to gain significant traction.

India’s cautious stance stems partly from fears of investor exploitation and the potential misuse of cryptocurrencies for illegal activities. High taxation, limited institutional support, and advertising restrictions have stifled the domestic crypto ecosystem, driving innovation offshore. Without a clear regulatory framework, businesses and investors are left in limbo, further exacerbating India’s disconnect from the global crypto revolution.

Lessons from other countries

Several countries have successfully implemented balanced policies that encourage innovation while addressing concerns about financial stability and consumer protection. For example, the European Union’s Markets in Crypto-Assets (MiCA) regulation offers a comprehensive framework for crypto governance. MiCA sets standards for asset issuers, service providers, and environmental disclosures, ensuring both innovation and market integrity. Germany, on the other hand, exempts long-term crypto holdings from taxation and allows loss offsets, encouraging investment. A similar approach in India could attract startups and investors to the domestic crypto ecosystem. 

Estonia’s use of blockchain in e-governance demonstrates how distributed ledger technology can revolutionise public administration. By integrating blockchain into governance, India could not only enhance transparency but also build trust in public systems. 

Economic case for cryptocurrencies in India

The adoption of cryptocurrencies could unlock significant economic benefits for India. First, it could bring millions of unbanked citizens into the financial system. Mobile wallets powered by cryptocurrencies can provide access to financial services in rural areas, driving financial inclusion. Additionally, cryptocurrencies could streamline cross-border remittances, a vital lifeline for India’s economy, while reducing transaction costs.

India’s Income Tax Appellate Tribunal (ITAT) recently ruled that cryptocurrency gains categorised as capital gains are eligible for indexation benefits. This interpretation aligns with global practices, where digital assets are often classified as property for taxation purposes. However, broader reforms — such as tiered taxation, akin to Germany’s model, and relaxed TDS requirements — could create a more investor-friendly environment. These steps would not only reduce the burden on retail investors but also encourage long-term participation in the crypto market.

Beyond cryptocurrencies

While cryptocurrencies grab headlines, blockchain technology itself offers immense potential beyond financial applications. From supply chain management to governance and digital identity verification, blockchain could revolutionise key sectors. Estonia’s blockchain-based e-governance model, for instance, showcases how technology can improve public service delivery and reduce corruption.

With its vast population and immense tech talent, India is uniquely positioned to lead in blockchain innovation. A collaborative effort between the government and private sector could create a robust blockchain ecosystem that drives economic growth while addressing India’s specific challenges.

Can India afford to be left behind?

The global crypto revolution is no longer a distant possibility — it’s here, reshaping economies and industries. India cannot afford to be left behind. While concerns about financial stability and investor protection are valid, they don’t justify inaction.

A balanced regulatory framework could address these challenges without stifling innovation. Failing to act risks pushing crypto innovation offshore and depriving the nation of immense economic and technological opportunities. The latest report suggests that 580 million people worldwide own cryptocurrencies. By crafting crypto-friendly policies, India could tap into this growing market and position itself as a leader in the digital economy.

(Abhishek Patni is a New Delhi-based senior journalist. X: @Abhishek_Patni.)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.