Will Indian investors become impacted if the US became the world’s Bitcoin superpower?

When Donald Trump, former US President and GOP presidential nominee delivered his speech at the Bitcoin 2024 conference, it soon made headlines all across the world. Trump reiterated his plan to establish his country as the “Crypto Capital” and “Bitcoin Superpower” of the world — providing much hope to American crypto enthusiasts.

Since Bitcoin was released, it has grown rapidly to become the top new asset class in the world. While world governments did not perceive it as a financial changemaker asset at first, the significant adoption rates globally have forced them to think otherwise. For instance, the US government did not have a high opinion of BTC and other cryptocurrencies in the past decade, but the scenario has changed drastically since then as Trump pledged to create a “strategic reserve” of Bitcoin for the US government. Additionally, Trump raised a significant amount of Bitcoin campaign funding which helped to bolster his claims as BTC price soared thereafter.

However, while this may be a strategic decision on Trump’s part to woo crypto investors, turning it into reality will be very difficult. This is largely because the US has one of the highest crypto taxes in the world, which defeats the purpose on the investors’ part. Going away with the tax will not be easy for any administration, however, adopting a liberal approach towards the crypto ecosystem could have a significant impact on global investors, especially in India.

Significance for India

India has been one of the main advocates of establishing a legal framework for all cryptocurrencies, including Bitcoin. While the country has one of the highest crypto adoption rates in the world, it also has a high taxation for VDAs. However, while the Reserve Bank of India (RBI) maintains its historical prerogative regarding cryptocurrencies, the Securities and Exchange Board of India (SEBI) has shown a favourable outlook for this new asset class. As a result, the GOI has instructed the RBI and SEBI to work together to come up with a blueprint of a framework, following discussions with stakeholders. If Donald Trump ends up in the Oval Office later this year and looks to transform the existing crypto legislation in the US, it will only bolster India’s stance to creating a global collaborative crypto framework - as revealed in the G20 Summit in 2023.

Simultaneously, India is also working on a Crypto Bill, which could gather steam if Donald Trump decides to transform the US crypto ecosystem. As a result, investors in both countries can expect more benefits in trading and taxation, however, the biggest beneficiaries will be the whales; predominantly because of their already large portfolios, which they may decide to sell off at inflated prices in a bid to book profits.

If we talk about Bitcoin, their value is a primary result of their finite numbers and high demand. If world governments, including the US and India, decide to begin a crypto race in future, there are some chances that their value will witness a slump. The latest figures state that out of 21 million Bitcoins, 19 million have already been mined - a staggering 90%. This leaves little room for world governments to create any strategic reserves while competing with retail and institutional investors, without paying a premium. Global Bitcoin investors may find increased volatility in the market as a result, however, the participation of states will only bolster its position in the future.

Impact on Indian investors

The US becoming a Bitcoin superpower or India competing with the US in a crypto race are multi-layered events that should not be perceived positively or negatively. For a better understanding, one needs to know more about the challenges and opportunities facing Indian investors to grasp how they will be impacted in case the US becomes the Bitcoin superpower of the world. Presently, Bitcoin and other cryptocurrencies are unregulated, however, if the US indeed looks to become heavily invested in this new-age asset class, some form of regulations will be introduced. India has been the major advocate of this, and a collaborative approach can be expected between the two countries considering the end goal.

Additionally, high taxation and capital gains are currently the major concerns of Indian crypto investors, retail and institutionalised. In case Donald Trump manages to make the US the Bitcoin capital of the world, similar benefits can be expected from the GOI to supplement the adoption rate and trading. However, since the crypto ecosystem is not regulated by one single government and has no geographical boundaries, it will ultimately come down to the financial prowess of investors from different countries, which may lead to a US-monopolised market in the future. However, this prediction can only be made using assumption, as the Bitcoin market can be impacted by numerous events or policy changes around the world which may lead to a very different outcome.

(The author is Co- founder & CEO of GoSats)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)