The central bank of the country is concerned, however, that cryptocurrencies could be used for money laundering and terrorist financing.
Bitcoin is the currency of choice for young Indian investors.
The founders of two of India's largest "cryptocurrency" stock exchanges told CNN that their demographic is under 35, with many hailing from smaller cities and towns.
Many Indian millennials, according to Sumit Gupta, CEO and co-founder of Exchange CoinDCX, have begun "their investment journey with encryption"
"These young people are more interested in having bitcoin as part of their portfolio," Gupta said, referring to the fact that Indians have traditionally chosen to "park" their money in gold or savings accounts.
Purchasing gold for India is a cultural tradition as well as an investment. According to the World Gold Council, the country is also one of the largest markets for precious metals.
Hindus and Jains regard gold as "auspicious" and it is used in many religious ceremonies.
Last year, Mumbai-based CoinDCX raised $ 1.1 billion from investors including Coinbase Ventures and B Capital Group. According to the company, 70% of its 10 million users are between the ages of 18 and 34.
The figures released by WazirX, a competitor, tell a similar story. WazirX has over 10 million users and has predicted that 2021 will be a "phenomenon" year in India for cryptocurrency transactions. Binance, one of the world's largest cryptocurrency exchanges, bought the company in 2019.
According to a recent company report, "more than 65 percent of its users are under the age of 35," and "the number of participants from smaller cities such as Guwahati, Karnal, and Bareilly has increased by 700 percent, signaling a growing interest from rural and semi-rural areas."
Pritish Kumawat, a cryptocurrency trader from a small town in Rajasthan's western state, said he now finds cryptocurrency discussions in almost every tea shop in his neighborhood.
Students are frequently the most committed participants, he said, adding that the massive rise in bitcoin last year fueled the frenzy in India.
Bitcoin reached a record high of $ 68,990 in November, but has since fallen to around $ 43,000.
By fLEXI tEAM