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India's crypto industry is growing by leaps and bounds despite a gray cloud of regulatory uncertainty, according to a new study. According to the study, the virtual currency market size in India increased by 39% from USD 53.1 million in FY2020 to USD 74.2 million in FY2021. The study was conducted by the National Association of Software and Services Companies (NASSCOM) and cryptocurrency exchange WazirX.
From 2019 to 2020, the amount of crypto assets held by individuals increased by 612%, and the number of individual investors more than doubled from 7 million last year to 15 million in 2021, the report said. says. This means that around 1.8% of India's adult population has invested in cryptocurrencies.
This is one of the first studies to point out the number of crypto investors and startups in India. The government has previously admitted that it does not have data on crypto investors, the number of exchanges, or taxes collected on crypto revenue.
This finding supports the significant increase in new user sign-ups reported by cryptocurrency exchanges such as WazirX and CoinDCX. WazirX announced last month that new user registrations on its platform have increased by more than 2,000%. WazirX says new registrations from smaller towns and cities have increased by 2,648% this year. In fact, small towns and cities are leading the way in cryptocurrency adoption, accounting for 55% of all user sign-ups on WazirX.
More importantly, women in small towns and cities are adopting cryptocurrencies, outpacing women traders in urban areas. 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 and has processed over USD 20 billion in trading volume this year.
CoinDCX, which became India's first virtual currency unicorn this year, also saw a significant increase in the number of new user registrations. The exchange claims to have 3.5 million users and doubled its user base from June to August 2021. Earlier this year, CoinSwitch Kuber claimed to have become the country's largest exchange in terms of number of users, with over 10 million customers.
According to the report, Indians invested USD 6.6 billion in crypto assets, and its market capitalization exceeded USD 40 billion this year. Driven by domestic demand for cryptocurrencies, Indian crypto startups also recorded significant growth. Currently, the country is home to over 230 crypto startups and over 150 proof-of-concepts and projects, employing 50,000 Indians. These startups have posted revenue growth of 40% to 50% over the past two years, outpacing the broader technology sector's revenue growth of 10% to 11%.
These startups are increasingly attracting institutional funding, with Silicon Valley giants like Mark Cuban, Peter Thiel and Tim Draper pouring billions into the space. According to the study, institutional funding for crypto startups in India increased 8.1x between 2019 and 2021.
In addition to investments, the country is also attracting foreign exchange to set up shop in India. Binance acquired WazirX in 2019, becoming the first international exchange to enter the market. Earlier this month, US-based capital markets-focused exchange Crosstower entered India.
Robust growth of crypto startups and companies will expand the market size to USD 241 million and create over 800,000 jobs in India by 2030, a research report claims . This growth will generate economic value addition of US$ 184 billion in the form of investments and cost savings in India by 2030, the report said. Around USD 105 billion will be invested in India's crypto sector, and the report claims that lower remittance costs will lead to savings of around USD 79 billion by 2030.
“India's cryptographic technology industry is not only showing positive impact at the grassroots level but is also emerging as the fastest growing technology sub-sector,” said Debjani Ghosh, President, NASSCOM. “India offers the most unique ecosystem for cryptography and has played a transformative role in strengthening key priority areas such as healthcare, security, digital identity, trade and finance, and remittances, which have been driven by the pandemic. We will help you deal with the challenges.”
However, this rapid growth forecast operates under the assumption that cryptocurrencies will not be banned in the country. Rumors of a crypto ban have dogged the industry for years, and regulatory uncertainty remains as the crypto bill awaits cabinet approval.
The country's central bank is actively pushing for a ban on cryptocurrencies, especially in payments. The country's largest banks have also withdrawn from the virtual currency business and have independently banned virtual currency transactions. This has limited payment options for crypto traders, but they have found ways to get around these limitations by trading via peer-to-peer transfers and other methods.
Despite the Reserve Bank of India's strong stance on cryptocurrencies, Finance Minister Nirmala Sitharaman has repeatedly stated that there are opportunities in the crypto business. Sitharaman said just last week that while the country is not in a position to accept cryptocurrencies as legal tender like El Salvador, it cannot shut them out completely.
The latest developments suggest that governments are considering classifying cryptocurrencies as a commodity asset class. Last week, the government set up a committee to consider how to tax crypto income. The committee is expected to submit its report within three weeks. If the crypto currency bill is approved by the cabinet by November, it will be submitted to the winter parliament for deliberation.
