ZoneBitcoin EditorialDespite a complicated regulatory and tax environment, India is emerging as a major player in the adoption of cryptocurrencies. By 2023, India has surpassed several other wealthier nations to become the second-largest cryptocurrency market by estimated gross trading volume.
In this article, we will try to understand why the country is leading the adoption of cryptocurrency despite the many challenges it presents.
Cryptocurrency adoption in India despite complicated regulatory environment
According to the 2023 Global Cryptocurrency Adoption Index published by Chainalysis, India tops the list, followed by Nigeria and Vietnam. More so, we also observe that among the top ten countries in the index are in Central and Southern Asia and Africa. This positioning demonstrates the growing importance of emerging countries in the global cryptocurrency ecosystem.
Thus, it may seem surprising that India tops the list in the adoption of cryptocurrencies if we judge its regulatory environment considered harsh for the crypto industry. Unlike Europe for example (proportionally little represented in the ranking) which has an important ecosystem and rather clear regulations (see Mica), adoption is much stronger in India or Vietnam, countries where regulation is lacking. Despite this context, more 7% of the Indian population owns cryptocurrencies, with a total of 156 million active users.
However, recall that in 2018, the Reserve Bank of India (RBI) issued a ban preventing financial institutions from providing cryptocurrency-related services, which resulted in the closure of bank accounts of several cryptocurrency-related companies . Although this ban was lifted by the Supreme Court of India in 2020, this has prevented the crypto industry from growing peacefully. This is reminiscent in many ways, the case of Morocco, which despite an environment hostile to cryptocurrencies, sees an ever-increasing use of cryptocurrencies.
Read —> Morocco is experiencing a growing attraction for Bitcoin, despite its ban
Likewise, the Indian government has formally decreed that anti-money laundering rules apply to cryptocurrency transactions. In addition, a single tax regime is applied to all transactions carried out in cryptocurrency. The country levies a 30% capital gains tax on cryptoassets, which is a higher tax rate than other investments like stocks. Additionally, a 1% tax is withheld at source for all transactions.
These are tax measures which generally do not encourage investment in cryptocurrencies. Yet despite this, adoption is the highest in the world.
India: an ecosystem under construction
With such a volume of individual crypto transactions taking place in India, more and more crypto companies are being created and established in India as the national exchange. Bitcoin or CoinDCX which is the largest platform in the country.
Many of the largest international crypto companies have offices in India. This is particularly the case for exchange platforms like Gate.io, OK or WazirX or investment funds like BlackRock or Lightspeed Venture Partners.
This trend is notably reinforced by institutional adoption which is also gaining momentum despite a bear market which has continued since 2022.
Today, India surpasses several wealthier nations with a more developed crypto ecosystem (including media, popularizers, influencers, businesses, etc.). If the government fully embraces cryptocurrencies, then its adoption could literally explode.
Finally, India has one of the largest economies in the world in terms of nominal GDP. It is generally ranked among the top ten economies in the world. With his influence in the BRICS, its use of cryptocurrencies could also influence the global regulatory framework in the future.
So-called emerging countries are leaders in the adoption of cryptocurrencies
For years, published reports on the adoption of cryptocurrencies have shown that emerging countries are at the top of the rankings. We could see, for example, in 2022 than among the 25 countries which had recorded the largest gains in cryptocurrencies included countries like Turkey, Vietnam, Nigeria, India or even Ukraine. These are countries that are, according to the World Bank, part of the lower middle income countries.
Thus, the leading countries in the adoption of cryptocurrencies are emerging countries with a weak economy and where the banking rate is low. This is explained by the fact that cryptocurrencies and in particular Bitcoin are practical alternatives to traditional banking systems.
You should know that these countries represent more than 40% of the world population. If cryptocurrency is as sought after by these populations as the data suggests, then this could have a significant impact on the adoption of cryptocurrencies in the global economy.
We can also add that India is part countries where women own the most cryptocurrencies, with more than 9% of them claiming to have them.
Final word
Finally, the Chainalysis report predicts that the adoption of cryptocurrencies will be steadily increasing as it is driven by both rich and developing countries. Although depending on the region, adoption is determined by different reasons, overall and on a global scale, populations in both the north and the south want to own and use cryptocurrencies.
This study supports our belief that the use of cryptocurrencies will become increasingly popular and legitimate across the world.
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