Based on crypto users alone, India certainly has the potential to become the next crypto hub. Several of the largest crypto firms such as Polygon and Algorand have already started targeting the Indian markets. Asia in general is also heating up in terms of crypto development.
Cryptocurrencies have been met with significant skepticism in various countries around the world, including India. In 2018, the RBI banned banks from dealing with any company or individual that was involved in trading digital assets. While the Supreme Court eventually overturned this ruling, digital assets were later hit with a 30 percent tax. That's the highest in the country and on par with gambling earnings.
However, despite these obstacles, the adoption of cryptocurrencies in the country has seen a steady increase in recent years. A recent study by Statista claims that India is on track to reach 156 million cryptocurrency users by the end of 2023. As a result, India could account for more than half of the world's cryptocurrency users by the end of the year. Could this mean that the country is shaping up to be the next crypto hub? Tag to find out.
What does the study say?
The report states that cryptocurrency users increased by 760% between 2017 and 2022, reaching 134 million users at the end of last year. This increase could be attributed to the COVID-19 pandemic, India's huge smartphone user base, the country's drive to become a cashless economy, and the rise of FinTech in the nation. The report also goes on to claim that if this trend persists, more than 11 percent of India's population or 156 million people will start using cryptocurrency by the end of 2023.
According to the Statista 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 around $3.3 billion this year, and profits could more than double to almost $6 billion by 2027.
The report also sheds light on the demographics and distribution of cryptocurrency users in the country. The findings show that residents of Delhi and Bangalore are the most inclined to buy and hold digital currencies for the long term. The majority of those anticipated to join and gain a foothold in crypto are educated young people who belong to a middle-class social structure.
Could India become the next crypto hub?
Based on crypto users alone, India certainly has the potential to become the next crypto hub. Several of the largest crypto firms such as Polygon and Algorand have already started targeting the Indian markets. Asia in general is also heating up in terms of crypto development. For example, last month Hong Kong opened its doors to crypto companies. Chinese banks were quick to take notice and extended financial support to crypto companies that were flocking to the special administrative region.
In addition, we also have the lack of capital gains of Singapore 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 problems in Europe and the US. And with cryptocurrency users expected to hit 156 million by the end of 2023, the web3 companies will have an eye on India.
Future regulatory concerns still linger
There is another side of the coin. The digital asset industry in India has already faced significant regulatory hurdles in recent years. More recently, the use of UPI was banned on cryptocurrency exchanges, which is fast becoming one of the most popular means of sending and receiving money in India.
This was a huge blow to platforms like WazirX, CoinDCX, ZebPay, etc., which saw a massive decline in trading volume. And as cryptocurrency users continue to grow, the possibility of more regulatory restrictions has also increased. With India hosting the G20 summit this year, Hon'able 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 can appear as a speculative region for crypto companies.
Additionally, $22.7 billion worth of crypto transactions are still expected to come from the US in 2023. That's more than half of the $43 billion worth of transactions worldwide that were expected to account for cryptocurrencies in 2023. India, despite being on track to have almost 5 times the number of cryptocurrency users than the US, is expected to account for just $3.3 billion of global transaction value in 2023 As such, with significant risk and little reward, cryptocurrency companies may be hesitant to enter the region, and India's dreams of becoming a crypto hub seem a bit distant.
Conclusion
The growth of cryptocurrency 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 the rules in the future. However, how things turn out, only time will tell.
