A new study has revealed that India's cryptocurrency industry is growing by leaps and bounds despite the looming shadow of regulatory uncertainty. The study found that India's cryptocurrency market size grew 39% from USD 53.1 million in FY20 to USD 74.2 million in FY21. The study was conducted by the National Association of Software and Services Companies (NASSCOM) and cryptocurrency exchange WazirX.
According to the report, from 2019 to 2020, retail holdings of crypto assets grew by 612%, while the number of retail investors more than doubled from 7 million last year to 15 million in 2021. This means that around 1.8% of India's adult population is invested in cryptocurrencies.
This is one of the first studies to show the number of crypto investors and startups in India. The government had previously admitted that it did not have any data on the number of crypto investors, exchanges, or taxes levied on crypto income.
The findings support the significant increase in new user registrations reported by crypto exchanges such as WazirX and CoinDCX. Last month, WazirX announced a more than 2,000% increase in new user registrations on its platform. This year, WazirX said it has seen a 2,648% increase in new registrations from smaller towns and cities. Indeed, small towns and cities are leading the way in crypto adoption, making up 55% of WazirX's total user registrations.
More importantly, women in small towns and cities are embracing cryptocurrency at the expense of their urban counterparts. These small town women traders make up 65% of all women registered on WazirX. The exchange claims to have over 7.3 million users on its platform, with trading volumes exceeding $20 billion this year.
CoinDCX, which became India's first crypto unicorn this year, has also seen a significant increase in new user registrations: the exchange claims to have 3.5 million users and doubled its user base between June and August 2021. Earlier this year, CoinSwitch Kuber claimed to have over 10 million customers, making it India's largest exchange by user count.
According to the report, Indians have invested $6.6 billion in crypto assets this year, which have a market capitalization of over $40 billion. Driven by the domestic demand for cryptocurrencies, Indian crypto startups have also recorded significant growth. Currently, India has over 230 crypto startups and over 150 proofs of concept and projects, employing 50,000 Indians. These startups have seen revenue growth of 40%-50% in the past two years, outpacing the overall tech sector revenue growth of 10%-11%.
These startups are increasingly attracting institutional funding, with Silicon Valley bigwigs such as Mark Cuban, Peter Thiel and Tim Draper pumping huge amounts of money into the space. According to the study, institutional funding in Indian crypto startups grew 8.1 times between 2019 and 2021.
In addition to investment, India is also trying to attract foreign exchanges. Binance became the first international exchange to enter the Indian market when it acquired WazirX in 2019. Earlier this month, US-based capital markets-focused exchange Crosstower opened in India.
The robust growth of cryptocurrency startups and businesses will help the market grow to $241 million and create over 800,000 jobs in India by 2030, the study claims. This growth will generate $184 billion in economic value added in the form of investment and cost savings in India by 2030, the report said. Around $105 billion will be invested in India's cryptocurrency sector, leading to savings of around $79 billion by 2030 through reduced remittance costs, the report claims.
“The Indian crypto industry is not only demonstrating positive impact at the grassroots level but is also emerging as the fastest growing technology sub-sector,” said Devjani Ghosh, President, NASSCOM. “India offers the most unique ecosystem for crypto technology, which will strengthen key priority areas such as healthcare, security, digital identity, trade and finance, and remittances, and play a transformative role in addressing the challenges posed by the pandemic.”
But predictions of rapid growth are based on the assumption that cryptocurrencies will not be banned in the country. Rumors of a crypto ban have plagued the industry for years, and regulatory uncertainty continues as a proposed cryptocurrency bill awaits cabinet approval.
The country's central bank has been aggressive in pushing to ban the use of cryptocurrencies, especially for payments. Major domestic banks have also gotten out of the crypto business and imposed their own crypto trading bans. This has limited the payment options for crypto traders, but they have found ways around these restrictions by transacting through peer-to-peer transfers and other methods.
Despite the Reserve Bank of India's hardline stance against cryptocurrencies, Finance Minister Nirmala Sitharaman has repeatedly maintained that there is opportunity for crypto businesses. Just last week, Sitharaman said that while India is not in a position to accept cryptocurrencies as legal tender like El Salvador, it cannot afford to exclude them completely.
The latest developments suggest that the government is looking to classify cryptocurrencies as an asset class product. Last week, the government set up a committee to consider ways to tax cryptocurrency income. The committee is expected to submit its report within three weeks. If the cryptocurrency bill gets cabinet approval by November, it will be debated in the winter session of parliament.
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