Cryptocurrencies: Will 2025 be a breakout year for policy and prices?

The year gone saw historic highs for Bitcoin. The entry of US president-elect Donald Trump will increase the chatter around a roadmap for regulation of virtual digital assets growing. Will India take a stand and not miss the bus?

By Salil Panchal , Naandika Tripathi

Published: Dec 23, 2024 10:28:40 AM IST

Updated: Dec 23, 2024 11:56:50 AM IST

Image: Shutterstock

The year 2025 could well be a breakout one for virtual digital assets such as cryptocurrencies, even as global Bitcoin prices are expected to touch fresh highs. Buzz and action from United States president-elect Donald Trump and his administration towards regulation of cryptocurrencies, further growth in assets under management for Bitcoin ETFs and demand for Bitcoin and other stablecoins, might, all, lead to policymakers in other countries having to re-look and re-think their regulation towards cryptocurrencies in 2025.

On December 17, Bitcoin hit a lifetime high of $108,000 and since the US elections, soared 50 percent with a year-to-date gain of 148 percent. Since then, prices have hovered near $96,000.

“Any regulatory changes in the US could also influence and nudge India’s approach toward this sector,” Sumit Gupta, co-founder of India’s crypto exchange CoinDCX tells Forbes India. CoinDCX, like crypto exchanges in India – both big and small – is, independently, exploring journey to expand in a still unregulated crypto ecosystem. While margins are small but the scale is growing, the larger exchanges such as CoinDCX and CoinSwitch are on the path of adopting alternative sources of income, which could be in the form of new coins, offering value added products such as SIPs and portfolio management services.

Fresh whispers around virtual digital assets

Indian policymakers are closely observing global developments around crypto and actively engaging with their international counterparts to shape a comprehensive global framework. This month, on December 16, India’s Minister of State in the Ministry of Finance Pankaj Chaudhary responded to a specific query in the Lok Sabha on whether the government is creating a comprehensive framework for the regulation of virtual digital assets (VDA).

“All jurisdictions, including India, are expected to evaluate their country specific characteristics and risks,” Chaudhary said, in reference to the adoption of a roadmap proposed by the International Monetary Fund and the Financial Stability Board after the G20 talks of 2023.

“A part of such a process may involve publication of a discussion paper.” But he also noted that “the need to balance investor protection and innovation must be assessed in the broader objective of protecting the Indian economy from risks of VDAs. The government has undertaken formal and informal consultations with stakeholders including industry and international organisations from time to time on policy formations of crypto assets,” he said.

There is, however, no timeline anticipated for introduction of comprehensive regulatory guidelines for VDA industry in India, the minister had responded.

Gupta suggests that the Indian government, meanwhile, should focus on adopting a balanced regulatory approach that promotes innovation while safeguarding consumer interests and preventing misuse. His business rival Ashish Singhal, co-founder of CoinSwitch hopes that government regulation will help the industry tackle crypto-related taxation issues involving offsetting losses (against crypto gains or against any other income) and also payment of 1 percent TDS (on sale or transfer of crypto) which goes to the government. “These two issues still discourage high frequency trading volumes in India,” Singhal tells Forbes India. “It is a long journey. The government is aware of issues and understand the impact on the industry. We are hopeful that that this will change.”

Industry expert Sidharth Sogani Jain expects India to establish a regulatory framework, with a proposed digital asset regulatory authority (DARA) comprising representatives from SEBI and RBI.

Maturing market

Crypto trading data is starting to reveal a maturing market in India. “Data from CoinDCX exchange suggests 51.5 percent of investor portfolios in 2024 included a mix of Bitcoin and altcoins, signalling a shift from speculation to strategic allocation. I predict an additional 10 to 15 percent allocation of Bitcoin in investors’ VDA portfolio, driven by the increasing focus on long-term value,” CoinDCX’s Gupta says.

A CoinSwitch 2024 report on India’s crypto trading trends shows that with over 2 crore crypto users, Dogecoin is the most traded with six percent investors onboarded, followed by Bitcoin and Ethereum. In 2024, Delhi-NCR region remained the leader in crypto adoption with one-fifth of the investors from this region, followed by Bengaluru (9.6 percent) and Mumbai (6.5 percent). CoinSwitch claims its registered users grew 25 percent year-on-year to 2 crore while volumes rose 6.5 times in CY2024.

Policy changes in the US have already triggered a 27 percent surge in daily investments post-2024 elections, with CoinDCX claiming to record a jump from $9.5 million to $35.3 million in daily volumes within a month. According to Gupta, this reinforces the critical role of regulatory clarity in shaping market sentiment.

But Jain says the ongoing crypto boom has not attracted new investors or led to significant volume spikes in India due to the recent WazirX crypto heist incident and lack of regulation. In one of the largest cryptocurrency hacks in Indian crypto history, WazirX suffered a massive breach in July, resulting in a staggering loss of Rs2,000 crore ($234.9 million) in digital assets. The hackers gained unauthorised access to the exchange by exploiting a compromised account.

“People are reluctant to invest because of these factors, which has hindered the growth of the crypto market in India. However, the boom is benefiting existing investors in India, who had invested money before and are now breaking even or turning a profit,” says Jain, who is the CEO of Blue Aster Capital, a hedge fund specializing in quantitative trading.

Jain argues that the Indian exchanges have not done justice to the crypto ecosystem, and their approach has been focused on making money rather than maintaining transparency and stability.

Adoption, not a groundswell

Ajeet Khurana, former CEO of Zebpay and now CEO of Reflexical, which helps Web3 projects scale up, says that while India is seeing more adoption of crypto, “it is nowhere close to a groundswell” as there is still hesitancy from the educated, upper middle class to invest in crypto.

Khurana, like CoinDCX’s Gupta agrees that depending on Trump’s moves towards adoption of regulation on VDAs, other countries will also not want to be left behind. “On India, I have seen that we might have been a late mover on sectors such as e-commerce, private mutual funds, payment gateways and ride-sharing firms Uber/Ola. But since we do not want to be left behind in tech innovation, we then catch up fast.”

Thus, Bitcoin and the cryptocurrency ecosystem has much to look forward to in 2025, both in terms of policy and prices.