A study on the impact of demonetisation on cryptocurrency in India

Abstract

Unaccounted wealth (UW) is a large unsolved problem in India. The demonetisation exercise in November 2016 was an attempt to address it. As regulatory measures are taken to tackle UW, criminals identify newer ways to avoid detection, e.g., cryptocurrency usage for illicit activities, as it bypasses formal banking channels. This article examines evidence of change in cryptocurrency usage in the context of demonetisation. This is done by examining four datasets viz. keyword search for bitcoin (BTC), volume of BTC traded in India, price variation between USD/BTC/INR and BTC blockchain transaction dataset. The data indicates heightened awareness of cryptocurrency, increase in volume traded and increase in price spread between BTC/USD/INR, though unable to discern deviation in blockchain dataset due to India led transactions. Increasing BTC usage, given inability to regulate these transactions, supports move by Government of India to ban its usage till the technology and its implications are understood better.