Despite its strict regulatory stance on the crypto sector, India has shown notable growth in crypto adoption. This week, blockchain research firm Chainalysis released its ‘2024 Global Crypto Adoption Index’, where India ranked first out of 151 nations. The country leads in overall crypto adoption, centralised service value, and retail centralised service value. Remarkably, this is the second consecutive year India has claimed the top spot, having also ranked first last year for the highest grassroots adoption of cryptocurrencies globally.
According to the Chainalysis report, India falls within the Central and Southern Asia and Oceania (CSAO) region. The report highlights that the CSAO region leads the world in crypto sector growth, with crypto asset inflows totaling approximately $750 billion (around Rs. 63.05 lakh crore) between July 2023 and June 2024.
“CSAO dominates our 2024 index, with seven of the top 20 countries located in the region. CSAO has a unique set of crypto markets with high levels of activity on local crypto exchanges, with merchant services, and in DeFi,” the report said.
India’s Crypto Landscape
In India, cryptocurrencies are viewed as virtual digital assets suited for investment and trading, though none are recognised as legal tender alongside the Indian Rupee (INR).
Since 2022, the government has imposed a 30 percent tax on capital gains from crypto activities and a 1 percent tax deducted at source (TDS) on every transaction. According to the finance ministry, this measure is crucial for tracking crypto transactions, which are often difficult to trace due to their anonymity.
In December last year, India mandated that all firms dealing with cryptocurrencies must obtain an operational license from the national Financial Intelligence Unit (FIU).
Despite these evolving regulations, crypto-related fraud and hacking incidents have surged in India. In July this year, the country’s crypto sector was shaken when hackers breached a wallet on the WazirX exchange, resulting in losses exceeding $230 million (around Rs. 1,900 crore). While WazirX has been cooperating with authorities like CERT-In to investigate the breach, an official statement from the finance ministry is still awaited.
Commenting on India’s approach towards the crypto sector, Chainalysis said, “The good news is that India’s path to crypto adoption is becoming clearer, due to continued engagement between the industry and regulators. Although this shift is more recent, we look forward to seeing how India’s crypto market develops in the coming years.”
More Observations from Chainalysis
After India, Nigeria, Indonesia, the US, and Vietnam secured the second, third, fourth, and fifth positions, respectively, in the overall crypto adoption rankings.
Meanwhile, Ukraine, Russia, Phillipines, Pakistan, Brazil, and Turkey are ahead of the UK on the Chainalysis index – despite UK’s decisions to bring comprehensive rules to govern the crypto industry.
Chainalysis reported that in 2023, the growth in crypto adoption was primarily driven by lower-middle-income countries. This year, however, crypto-related activities have surged across countries in all income brackets.
The report further noted that, “Between the fourth quarter of 2023 and the first quarter of 2024, the total value of global crypto activity increased substantially, reaching higher levels than those of 2021 during the crypto bull market.”
The report indicated that the launch of Bitcoin ETFs in the US contributed to a significant rise in Bitcoin activity across all regions.
Discussing the US crypto market, Chainalysis highlighted that the country has the largest and most influential market globally, standing out by a considerable margin.