It was quite a contentious decision. Last year the Indian government made the decision to ban 85% of the cash that they had in circulation. It caused chaos at ATMs and money exchanges around the country as people tried to exchange the cash in particular denominations.
This was done in order to limit the use of cash for nefarious purposes and also to reduce tax evasion. Even though this did indeed cause quite a disruption, it is a great opportunity for the citizens to adopt Bitcoin and other cryptocurrencies.
This is not the first time that the Indian government has struggled with Monetary policy issues. The 500 and 1,000 INR bills were no longer legal tender. These were the most popular denominations for most Indians so the move caused a lot of pain.
A Broader Issue
The issue is much broader than general concerns about tax evasion. A large proportion of India's population remains unbanked and they live on these smaller cash payments on a daily basis.
Even for more middle class members of the population, it was a cursory warning as to the power that the government has over the affairs of their citizens. The notion that with the mere stroke of a pen, a great contingent of your wealth is no longer legitimate.
This, however, could have been effectively countered for those who invested in Bitcoin. It is no surprise then that the price of the coins has surged in the local currency.
Bitcoin for the Unbanked
Given this increasing demand for Bitcoin in India, demand for Bitcoin services are also increasing. For example, popular wallets such as Unocoin as well as exchanges such as Zebpay are doing really well in the country.
There are also a number of new start ups that are opening their books for business in the country. For example, a new start up called BitBox is looking to provide free trading on its platform. It will only charge users for withdrawal and deposit fees.
This is indeed a great concept as it aims to make transacting in Bitcoin fast and affordable. The coins will either be kept on the exchanges in a safe and secure cold storage or withdrawn at any time.
Store of Value
Although Bitcoin will greatly enhance the manner in which people can transact in India, Bitcoin also provides a great way for citizens to store their wealth with a deflationary asset. India is one of the countries with the largest demand for gold.
Citizens buy alot of gold precisely as they view it as a safe place to preserve their fortunes over time. As Bitcoin is often compared to a “digital gold”, it could provide them with another safe haven asset which diversifies.
Moreover, if one was to compare the performance over the past 5 years of Gold and Bitcon, Bitcoin not only provided for a store of wealth but also a great increase in it.
Featured Image via Fotolia
