Cryptocurrencies have been met with significant scepticism in several countries around the world, including India. Back in 2018, the RBI prohibited banks from dealing with any companies or individuals that were involved in the trade of digital assets. While the Supreme Court eventually overturned this ruling, digital assets were later hit with 30 percent taxation. That’s the highest in the country and at par with gambling winnings.
However, despite these hurdles, crypto adoption in the country has seen a steady increase over the last couple of years. A recent study by Statista states that India is on track to touch 156 million crypto users by the end of 2023. As a result, India could account for more than half of the world’s crypto users by the end of the year. Could this mean that the country is shaping up to be the next crypto hub? Tag along to find out.
What does the study say?
The report states that crypto users surged by 760 percent between 2017 and 2022, touching 134 million users at the end of last year. This spike could be attributed to the COVID-19 pandemic, India’s massive smartphone user base, the country’s push to become a cashless economy, and the rise of FinTech in the nation. The report also goes on to state that, if this trend persists, over 11 percent of India's population or 156 million people will start using cryptocurrencies by the end of 2023.
As per Statista's findings, India will adopt cryptocurrencies much faster than the United States, the United Kingdom, Japan, and Russia. Furthermore, the cryptocurrency industry in India could generate profits of about $3.3 billion this year, and earnings could more than double to almost $6 billion by 2027.
The report also sheds light on the demographics and distribution of crypto users in the country. Findings show that residents from Delhi and Bengaluru are the most inclined to buy and hold digital currencies for the long term. The majority of those predicted to join and get a foothold into crypto are educated, younger people belonging to a middle-class social structure.
Could India become the next crypto hub?
Just based on crypto users, India sure does have the potential to become the next crypto hub. Several of the biggest crypto firms, such as Polygon and Algorand, have already begun targeting Indian markets. Asia in general is also hotting up in terms of crypto developments. For instance, last month, Hong Kong flung open its doors to crypto businesses. Chinese banks were quick to take notice, extending financial support to crypto firms flocking to the special administrative region.
In addition, we also have Singapore’s lack of capital gains and the tax-free haven of Dubai. When you combine all these factors, Asia suddenly seems like an oasis compared to the regulatory backlash and banking troubles in Europe and the US. And with crypto users projected to hit 156 million by the end of 2023, web3 firms will have an eye on India.
Future regulatory concerns still linger
There is another side to the coin. The digital asset industry in India has already dealt with significant regulatory hurdles over the last couple of years. Most recently, crypto exchanges were prohibited from using UPI, which is quickly becoming one of the most popular means to send and receive money in India.
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This was a huge blow to platforms like WazirX, CoinDCX, ZebPay, etc, which all saw a massive decline in trading volume. And while crypto users continue to grow, the possibility of further regulatory restrictions has also increased. With India hosting the G20 summit this year, honourable finance minister, Nirmala Sitharaman, has made crypto regulation one of the mainstays of this year’s talks. Therefore, unlike Hong Kong, Singapore or Dubai, India may appear as a speculative region for crypto firms.
Also, $22.7 billion worth of crypto transactions is still expected to come from the US in 2023. That’s more than half of the $43 billion worth of transactions worldwide that cryptocurrencies are expected to account for in 2023. India, despite being on track to have nearly 5X the number of crypto users than the US, is expected to account for only $3.3 billion of the global transaction value in 2023. As such, with significant risk and not much reward, crypto firms may be hesitant to enter the region, and India’s dreams of becoming a crypto hub seem a little distant.
Conclusion
The growth of crypto users in India is a good sign. It shows that Indians see value in cryptocurrencies and continue to put their money behind these digital assets. This could encourage the government to relax norms in the future. However, how things pan out, only time will tell.
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