A study on the Impact of Demonetisation on Cryptocurrency in India
Authors: Krishna Iyer, Ravikumar VV
Journal: International Journal of Business and Globalisation
Publication date: Forthcoming
Publisher: Inderscience Publishers
URL: click here
Unaccounted wealth (UW) is a large unsolved problem in many developing countries including India. Several attempts have been made to address it. One such attempt was the demonetisation exercise in India in November 2016. Even as measures are taken to tackle UW, criminal actors identify new ways to avoid detection and continue their illicit activities. Cryptocurrencies are emerging as an alternative channel for funds flow for illicit activities as it bypasses formal channels with their well-set regulations. This article examines evidence of change in use of cryptocurrencies in India in the context of demonetisation. This is done by examining four data sets viz. keyword search for Bitcoin cryptocurrency (BTC), volume of BTC traded in India, price variation between USD/BTC/INR and BTC Blockchain transaction dataset. The data indicates that there is evidence of heightened awareness of cryptocurrency, increase in volume traded and increase in price spread between BTC/USD and BTC/INR in recent years though unable to discern specific deviation in Blockchain records pointing to India led transactions. The increasing usage trend for cryptocurrency in India combined with inability to regulate and monitor illicit transactions supports the nascent move by Government of India to ban its usage till the technology and its implications are better understood.