The Cryptocurrency market in India has been witnessing a very interesting phase in recent years. Despite extreme volatility and ambiguity in regulations, nearly 15 million Indians have reportedly invested in cryptocurrencies, such as Bitcoin, Ethereum, Litecoin, Tether, and Dogecoin, among others. So a new report by Chainalysis that says India ranks second in terms of crypto adoption worldwide, comes as little surprise to many.
Crypto adoption shifts to emerging economies
The Chainalysis’ 2021 Global Crypto Adoption Index said that India ranks only behind Vietnam, but is ahead of countries such as the US, UK, and China in crypto adoption. According to the report, which ranked 154 countries, worldwide crypto adoption grew by over 880% between June 2020 and July 2021. Global adoption has grown by over 2,300% since the third quarter of 2019, the blockchain data platform said.
The ranking was based on three metrics including peer-to-peer (P2P) exchange trading volume and value received. India was followed by Pakistan and Ukraine at rank three and four respectively. The US and China’s ranking dipped from sixth to eighth and from fourth to thirteenth respectively. The report attributes this drop in ranking to falling P2P volumes in the two countries compared to worldwide volumes.
Most of the top 20 countries are developing countries like Tanzania, Togo and Kenya. In this context, the report notes that in emerging markets, face significant currency devaluation, driving residents to buy cryptocurrency on P2P platforms in order to preserve their savings, while adoption in North America, Western Europe, and Eastern Asia over the last year has been powered largely by institutional investment.
Another recent report by US-based research platform Finder released this month too sheds light on the top five countries in terms of crypto adoption were all from Asia. The company surveyed 47,000 users worldwide and 30% of those surveyed in India said they owned cryptocurrencies. Bitcoin is the most popular coin in India, followed by Ripple, Ethereum and Bitcoin Cash, according to the report.
The report further stated that India’s “huge expatriate population” makes it the world’s number one remittance recipient in the crypto space. India had the largest expatriate population in the world with 18 million people from the country living outside their homeland last year, noted a January 2021 UN report.
Crypto adoption in India has also been led by smaller towns in the country. The largest crypto exchange in the country by trading volume, WazirX, had seen more than 2,648% growth in user sign-ups from tier II and tier III cities in India.
CoinDCX, another leading cryptocurrency exchanges, has seen a rising trend with more Indians actively trading in equities and crypto assets through platforms and apps like CoinDCX Go, which has more than 600,000 users trading 15 million cryptocurrency on daily basis.
“An exponential rise in digital adoption has been catalyzed by the COVID-19 pandemic. Consumers are more confident of making online purchases and there is a conscious shift towards adoption of crypto assets,” said Ramalingam Subramanian, CMO at CoinDCX.
A mindset shift
This massive surge in the growth of cryptocurrencies happens to be set in the backdrop of ambiguity. While the future is still uncertain for digital currencies, the government is beginning to realize that the technology could be way more significant than the economics of the currency itself.
Earlier in 2018, just when the crypto fire was lit in the country, the government put it off by introducing a blanket ban on banks preventing them from facilitating crypto transactions. It stemmed from the fear that the anonymity of cryptos would give way to frauds and underworld activities.
However, in May 2020, the supreme court lifted the ban stating that there were no grounds for placing such a ban on cryptocurrencies. With this statement, the cryptocurrency spark was reignited among Indians. Within weeks of lifting the blanket ban imposed by RBI, Indian investors rushed to make the most of their lost time. Since then, the volumes of traders and trading have been on a drastic rise month on month.
As the equivocation and resentment against cryptocurrencies wear off in India, the largest cryptocurrency – Bitcoin, is quickly becoming a favorite for Indians who were always known for being ardent investors of gold.
Experts say that the cryptocurrency growth in a country like India is significantly fueled by the youth between 18-35 years of age, most of whom happen to be first-time investors. On an interesting note, the female and elderly population are also entering this highly volatile market.
Global organizations are hiring some expert back-end engineers as more merchants accept payments in cryptocurrencies since it makes the whole international transaction process much easier and less time-consuming.
The increasing adoption of cryptocurrencies is another sign that the investment mindset of Indians is evolving rapidly from being highly conservative to more open to new markets and opportunities.
Regulatory Intervention in the Indian Crypto Market
While the number of private cryptocurrency exchanges operating in India is growing, the Union Government has no official data on them or the number of investors linked to these exchanges. In reply to a query on the number of cryptocurrency exchanges operational in India and the number of investors linked to them, Union Minister of Finance Nirmala Sitharaman in a written reply tabled in Rajya Sabha on Tuesday (July 27th, 2021) said: “This information is not collected by the Government.”
Meanwhile, the European Commission’s proposed Regulation on Markets in Crypto Assets (MiCA) is going through its first readings in the Council and the European Parliament. This regulation will form part of the EU’s Digital Finance Strategy and is likely to significantly impact the operation of the crypto market in the EU.
“With a positive regulatory environment, the entire crypto ecosystem will get a further boost going ahead,” said Subramanian.
The Government is expected to be working on a cryptocurrency bill and the RBI is also planning to introduce Central Bank Digital Currency (CBDC) in a phase-wise manner to curb the damaging consequences of private virtual currencies.
RBI Deputy Governor T Rabi Sankar recently said that the central bank was “working towards a phased implementation strategy and examining use cases which could be implemented with little or no disruption”. RBI is currently examining the scope of CBDCs, the underlying technology, the validation mechanism, distribution architecture, and degree of anonymity, etc.
Digital currency is the way of the future but the complete shift is not only unlikely but also quite concerning considering the turbulent status of cryptocurrencies.