Source: Bitcoin World; Translated by: Song Xue, Golden Finance
India leads the world in grassroots cryptocurrency adoption, surpassing countries with more trading and mining activities, and ranks second in terms of raw value received.
Cryptocurrency adoption has declined globally over the past two years, but in India adoption remains strong despite regulatory challenges.
Indian investors face high taxes, encouraging the use of offshore exchanges, while stablecoins have gained popularity in Pakistan due to economic instability.
Chainalysis recently released the Global Cryptocurrency Adoption Index
According to blockchain analytics platform Chainalysis’ recently released Global Crypto Adoption Index 2023, India ranks first in grassroots cryptocurrency adoption. The metric, which appears in Chainalysis’ annual “Geography of Crypto” report, assesses the acceptance of cryptocurrencies among the broader population, rather than just transaction volume.
Country comparison in Central, South Asia and Oceania: Inflow share by platform type, January 2021-June 2023
Most of India’s crypto flows to centralized exchanges
In this metric, India outperforms other countries in terms of Bitcoin trading and mining activities. Moreover, when looking at the ranking of countries based on the estimated value of cryptocurrencies between July 2022 and June 2023, India ranks second.
According to Chainalysis research, India has received about $250 billion worth of cryptocurrencies in the past year, second only to the United States, which has received about $1 trillion in cryptocurrencies in the same period.
India ranked first in the overall index ranking, second in the centralized service value ranking, third in the retail centralized service value ranking, and fifth in the P2P transaction volume rating. Nigeria, Vietnam, the United States, Ukraine, the Philippines, and Indonesia followed India.
Global Cryptocurrency Adoption Index 2023
How Does Chainalysis Calculate Crypto Adoption Rate?
Chainalysis estimates transaction volumes for various cryptocurrency services and protocols to measure global cryptocurrency adoption. This volume is calculated through regional traffic to websites that provide cryptocurrency services and protocols. Although online traffic is not a good indicator of overall cryptocurrency usage, it allows Chainalysis to add weight to the overall reliability of its data, which is supported by the millions of transactions recorded online.
According to the official report, Chainalysis also works with local cryptocurrency experts and operators around the world. This consultation process adds assurance and validity to their approach to assessing global cryptocurrency adoption.
Global adoption declines, while India leads
According to the survey, the country’s global cryptocurrency usage has fallen sharply over the past two years. After reaching an all-time high in the first quarter of 2021, cryptocurrency usage continued to decline and reached its lowest point in the fourth quarter of fiscal year 2023. Although the adoption rate has increased slightly in the past two quarters, it still cannot get close to the old figures.
Despite the widespread fear of missing out in the industry due to growing concerns about a global recession, cryptocurrency adoption in India continues to expand. Given that the Indian government has already imposed taxes on domestic investors, Chainalysis’ findings may come as a surprise to many.
Central, South Asia, and Oceania: Value of cryptocurrency received by country, June 2022 to June 2023
However, this could also be due to a lack of exposure among Indian investors to major losses in cryptocurrencies in 2022, such as FTX’s massive crash. According to the chart below, Chainalysis research shows that low- and middle-income countries, including India, improved significantly in the second quarter of 2022 and were able to maintain this level until the second quarter of 2023.
On the other hand, high-income countries such as the United States and other European countries have seen a decrease. Institutional adoption appears to have increased in the region, with deals valued at $1 million or more accounting for 68.8% of total deal volume, up from 57.6% in the previous period, the study showed.
Despite uncertainty over tax laws, there has been an unprecedented surge in trading volumes.
India has surpassed some of the world’s wealthier nations to become the second-largest cryptocurrency market, according to an analysis by Chainalysis.
Despite tax law ambiguity, transaction volume continues to grow at an unprecedented rate
According to the study, “India leads the world in grassroots adoption…but perhaps more impressively, India has become the world’s second-largest cryptocurrency market by raw estimated transaction volume, beating out several wealthy countries.”
According to the report, “India taxes cryptocurrency activity much more than most other countries, imposing a 30% tax on gains — a rate unique to Central Asia, South Asia, and Oceania, and higher than the country taxes other investments, such as stocks.”
Apart from this, Indian consumers have to pay an additional 1% tax on all transactions when using Indian centralized exchanges, which may be one of the reasons why Indian investors prefer offshore exchanges.
The above data shows that the traffic of Indian IP addresses on foreign exchanges has gradually increased, indicating that more and more Indian users are visiting international exchanges and conducting transactions.
The survey also highlighted the appeal of stablecoins in Pakistan, where they are used as a hedge against the country’s depreciating national currency and unpredictable inflation, given the country’s highly volatile economy.
Conclusion
As cryptocurrency industry stakeholders ask the Indian government to adopt comprehensive cryptocurrency rules, they highlight the potential benefits for entrepreneurs and investors.
Despite the government’s reservations about the growing nature of finance, cryptocurrency usage in India is increasing every day, paving the way for a comprehensive, industry-centric legislation in the future.
