As the world’s fifth largest economy and the largest democracy, can India afford to ignore Bitcoin, Bernstein asked in its latest note. It wondered whether leading Indian asset managers can follow global peers in launching Bitcoin ETFs; and talked about the role Indian regulators should play going ahead.
Bitcoin has been hitting new highs following Donald Trump's win in the recent US elections. Trump is the first crypto-friendly US President-Elect. As part of his campaign, he promised the 50 million strong crypto owners in the US a new future where US would be the Bitcoin and crypto capital of the world, as part of clear GOP Crypto policy statement.
There is an intent to make Bitcoin national strategic reserve that would never sell any Bitcoin held by the US government and acquire new Bitcoin. Bernstein said India's crypto narrative has been caught in this false premise of Central bank digital currencies (CBDC) and what the government calls ‘private crypto’.
"This framing is its own pitfall. India led the world in global payments and fintech with the success of UPI, today, the world’s largest payments network by number of transactions. The next logical path would be a CBDC which would digitise the rupee and further expand the India digital stack as a monetary tool for the government," Bernstein said.
Framing Bitcoin as a ‘private currency’ missed the strong proposition of Bitcoin as a ‘store of value’ asset in a world dealing with looming inflation, record US debt, fiscal lack of discipline and geopolitical risks.
"India has emphasised growth of its gold reserves, from 557 Tonnes to 854 tonnes (53 per cent growth) over the last decade. India has de-risked gold custody by moving almost 100 tonnes of Gold back to India from the UK. Bitcoin is a way for governments to build ‘Digital Gold’ reserves, without the risk of censorship by nations that physically custody gold, in a world where international relations are fragile and dollar reserves are subject to US fiscal risk," Bernstein said.
It urged Indian government to work towards a national Bitcoin policy, as part of broader crypto policy. Bitcoin, it said, is urgent as global asset managers, international governments and corporates race towards acquiring Bitcoin as strategic asset.
Global asset managers such as Blackrock, Fidelity, Invesco, Templeton, VanEck, Wisdom Tree, ARK, Valkyrie and Bitwise run a Bitcoin ETF, which acquires spot Bitcoin from the open market. Total assets under management has surpassed $75 billion within 10 months of launch, making it the world’s most successful ETF launch ever.
Bitcoin today is a $1.5 trillion asset, having delivered an annual return of 50 per cent over last 4 years, despite the nuclear crypto winter in 2022-2023. "Crypto policy is complex and may take time to build consensus, but Bitcoin policy is urgent and of national strategic importance," Bernstein said.
It said Indian asset managers should evaluate participating in regulated Bitcoin and crypto products. Their role in ensuring safety and compliance for Indian investors is critical, as the retail demand for crypto investing grows.
Besides, it said Indian payments and fintech players should work closely with regulators to offer Bitcoin and crypto as part of licensed platforms, again ensuring safety for users.
"Should Indian retail and institutional investors not gain access to regulated crypto products without risk of losing custody? Why should Indian investors deal with crypto exchange hacks and frauds (prevalent in India), losing their hard-earned savings? Why should India not have a leading asset manager provide safe Bitcoin exposure via regulated products? The answer is not to prevent Indians from owning Bitcoin, but to offer them safe, regulated on-ramps," it said.
Indian asset managers have the opportunity to carve this role within the Indian regulatory context, apart from the massive commercial opportunity as evidenced in the US.