According to the 2023 Global Crypto Adoption Index recently published by blockchain analytics platform Chainalysis, India has claimed the top spot in grassroots cryptocurrency adoption. This index, featured in Chainalysis' annual 'Geography of Cryptocurrency' report, specifically assesses cryptocurrency adoption among the general population rather than solely focusing on transaction volumes.
India's ranking in this index surpassed other countries with significant levels of cryptocurrency trading and mining activities. Furthermore, when examining the top countries based on the raw estimated cryptocurrency value received between July 2022 and June 2023, India secured the second position.
According to the Chainanalysis report, over the past year, India recorded approximately $250 billion in cryptocurrency value received, coming in second only to the United States, which recorded approximately $1 trillion in cryptocurrency value during the same period.
India has received the rank 1 in overall index ranking, centralized service value received ranking, retail centralized service value received ranking, DeFi value received ranking, but ranked 5th on P2P exchange trade volume ranking. India is followed by Nigeria, Vietnam, USA, Ukraine, Philippines, and Indonesia.
Chainalysis calculates global cryptocurrency adoption by estimating transaction volumes for various types of cryptocurrency services and protocols. This volume is calculated based on the regional traffic on the websites providing crypto services and protocols. Despite not being an accurate measure of the overall crypto adoption, web traffic enables Chainalysis to add layers to the overall reliability of its data which is also backed by patterns recorded in millions of Web 3 transactions.
According to the official report, Chainalysis also collaborates with local cryptocurrency experts and operators worldwide. This consultation process provides additional assurance and validation for their approach to calculating global cryptocurrency adoption.
In the report, the global crypto adoption in the country has reduced drastically over a span of the last 2 years. Hitting the all time high in Q1 2021, the crypto adoption continued to decline hitting its lowest in the last quarter of FY2023. Despite recording minor gains in the rate of adoption over the last 2 quarters, it could not come even closer to the old numbers.
However, despite the prevalence of extreme FOMO in the industry due to growing concerns of a global recession, crypto adoption in India continued to thrive. This fact from the Chainalysis report could be surprising for many as the Indian government is already taxing domestic investors left, right, and center.
However, this could also be because of the least exposure of Indian investors to the biggest crypto falls of 2022 including the great FTX collapse. In the graph shared below, the Chainalysis reports suggest that lower middle income countries which include India have shown significant improvement after Q2 2022 and has been able to sustain the levels till the Q2 2023.
On the other hand, the high income countries including the USA and the other European countries have observed a decline. According to the report, institutional adoption in the region also appears to have picked up, with 68.8% of total transaction volume coming in transfers valued at $1 million or more, compared to 57.6% in the preceding time period.
The report from Chainalysis clearly indicates that India has become the second largest crypto market in the world beating some of the wealthier nations across the globe.
The report states, “India leads the world in grassroots adoption…but perhaps even more impressively has become the second-largest crypto market in the world by raw estimated transaction volume, beating out several wealthier nations.”
The report highlights the high taxation rate in the country saying, “India taxes cryptocurrency activity at a much higher rate than most other countries, with a 30% tax on gains — a rate unique to crypto Central & Southern Asia and Oceania 56 and higher than the country’s tax rate on other investments such as equities.”
Along with that, Indian users also have to pay 1% extra for all the transactions while using Indian centralized exchanges which might have become the reason that Indian investors are choosing offshore exchanges to save that one per cent tax on every transaction.
In the chart above, you can see the gradual increase in the traffic on international exchanges from Indian IP addresses, indicating that more Indian users are visiting international exchanges and conducting transactions.
The report also highlights the popularity of stablecoins in Pakistan due to their highly unstable economy. Stablecoins are being used in Pakistan as a hedge against the continuously deteriorating local currency and uncontrollable inflation in the country.
As industry stakeholders urge the Indian government to establish comprehensive cryptocurrency regulations, they emphasize the potential benefits for entrepreneurs and investors.
But despite the government’s caution towards this emerging nature of finance, crypto adoption in India is increasing day by day, setting up the stage for the development of comprehensive and industry-centric regulations in the coming future.
The scope of India’s crypto market is immense and the report by Chanalysis is nothing but a testimony to this fact.