Indian crypto market: massive growth

Global institutions are targeting India, the next encryption “Silicon Valley” is emerging?

​​For a long time, India has been regarded by mainstream institutions as one of the markets with investment potential. India has the sixth largest economy in the world, and young people account for a high proportion of the total population.

In the crypto market in the first half of 2021, “Indian characteristics” are being released. According to Chainalysis’s global DeFi adoption index in mid-October. Among the 154 countries and regions counted, India’s adoption of Crypto has ranked second.

Data source: usefultulips

The rise in data and the easing of policies

The Supreme Court of India lifted the encryption ban by the Central Bank of India in March 2020. This became a turning point for the region. After the reopening of banking services to this industry, a series of changes followed.

This impact is quickly reflected in the issuance and usage of DApps in the region. In India, the Polygon project has ushered in an increase in utilization. In a single month, Polygon-based DApps have increased by more than 60, and a quarter are from India. In addition, in the following two months, the number of registered Indian crypto exchange WazirX increased by 150% and transaction volume increased by 66%.

This is just short-term data at the time. From a long-term perspective, this growth has continued. Localbitcoins data shows that after April 2020, India’s Crypto P2P transaction volume has started a long-term growth trend.

Take June 2021 as the observation node. In the first half of this year, the digital asset investment of Indian residents continued to rise from 200 million U.S. dollars in 2020 to 40 billion U.S. dollars in the first six months of this year. The daily trading volume of the four major Crypto exchanges soared to US$102 million from US$10.6 million a year ago. Comprehensive data shows that at that time, 15 million Indians were expected to participate in Crypto transactions, mainly from the 18-35-year-old youth group.

This number is still expanding. Just in the past October, Nischal Shetty, the founder of WazirX, the largest crypto trading platform in India, said on Twitter. It is estimated that there are now close to 20 million Crypto users in India.

On the other hand, also in June this year, the Indian government’s stance on Crypto became more moderate. That month, the local media The New Indian Express reported that the Indian government’s position on Bitcoin is changing. The Indian government has abandoned its original ban on Bitcoin and intends to classify Crypto currency as an alternative asset category.

This proposed method of supervision has also made progress in the near future. According to the content of various media reports, India is likely to supervise encrypted digital assets as “commodities.” Appropriate taxation of transactions and proceeds will be implemented, and further supervision methods will be introduced in February next year. In addition, the Securities and Exchange Commission of India will also cooperate with the Indian Ministry of Finance to jointly supervise the formulation of the country’s Crypto regulations. The Ministry of Finance and the Reserve Bank of India (RBI) will also participate in the adjustment of the Crypto regulatory framework.

It is worth noting that treating digital currency as a type of “commodity” is a different approach from the qualitative “securities” that has long been more inclined to mainstream regulatory thinking in the United States. This once again sent a new signal to the market. Officials of the Indian Parliament also publicly expressed the peculiarities of the relevant Indian bills, and their position is to recognize the importance of the Crypto field. The country has not yet achieved full account exchange, and it is impossible for India to adopt the Crypto-related policies of advanced economies, and it will not follow the example of the United States, Japan or El Salvador.

At present, the Indian Ministry of Finance has established a committee to review the scope of crypto currency taxation. There are several details of the Crypto transaction they are discussing. Whether income can be taxed as capital gains and whether to create a new tax category.

India: Investment targets targeted by the global market

In this context, between 2020 and 2021, global market investment in Crypto in India has surged.

Since the beginning of this year, the Indian blockchain industry has completed 16 transaction financings. The total amount is more than 627 million US dollars, which is 14.25 times that of last year. Last year, 10 local transactions were concluded with a total value of only 44 million U.S. dollars.

In this year’s market, India’s most representative encryption projects have appeared in Layer2 project Polygon (Matic), Indian Crypto exchange WazirX, Layer 0 expansion protocol Marlin, etc., mainly based on the original blockchain infrastructure. In addition, the global market has increasingly invested in the Indian Crypto sector, and trading platforms have become popular investment targets for VCs and institutions.

For example, just in the past October. CoinSwitch Kuber completed a US$260 million Series C financing with a valuation of US$1.9 billion, led by Andreessen Horowitz (a16z) and Coinbase Ventures. Investors Tiger Global and Sequoia Capital India participated in the investment.

This is a very representative financing case. This is a16z’s first investment in India, as well as Tiger Globa’s first investment in India’s Crypto company.

This heat quickly spread to the Indian financial market. A month ago, the fund management giant Invesco Mutual Fund has submitted documents to the Securities and Exchange Commission of India for investment in the Invesco Elwood global blockchain stock ETF.

Crypto has also brought changes to the Indian blockchain industry. According to a market analysis published by the British blockchain consulting company Dappros. As of November this year, the number of blockchain developers in India has ranked second in the world, second only to the United States, followed by the United Kingdom, Canada and France. There are a total of 12,509 developers in India using Ethereum, Solidity, blockchain and Hyperledger for development (the numbers are 2381, 1432, 19627, and 1579 in order). Relative to the population, based on the rough calculation of the population of India, there is one blockchain developer for every 100,000 people.

The Indian National Association of Software and Service Companies (Nasscom) stated in the “Indian Encryption Industry”. In the past five years, the Crypto industry, which includes transactions, applications, P2P payments, remittances, and retail, has grown by 39% in the past five years. Indian retail investors have invested approximately US$6.6 billion in crypto assets. The industry has brought jobs for 50,000 employees, more than 230 start-up companies and more than 150 concepts and projects to India. At the same time, it is predicted that by 2030, India’s Crypto technology market has the potential to create more than 800,000 jobs and US$184 billion in economic added value.

but. The policy risks of the Indian authorities and the risks of changes in the market background still exist, and these data still need to be carefully referenced.

Unique preferences of Indian concepts

The rapid expansion of the Indian Crypto market is based on a certain market environment and historical background. There is a view that the “major blockade” during the new crown epidemic has largely intensified the insufficiency of local financial services. The Indian market has a significant increase in demand for digital banking services. In the “Interpretation of the Status Quo of India’s Digital Currency Ecosystem” released by Coinpaprika and OKEx, in the first quarter of 2020, mainstream trading platforms ushered in a substantial increase in Indian traffic.

During the same period, OKEx’s new registered users from India increased by 4100%.

Nischal Shetty, the founder of Indian crypto exchange WazirX, also agrees with this statement. During the “Great Lockdown” in 2020, for those who sit at home because of the lockdown, want to learn new things, and learn about new opportunities from the outside world, Crypto has become One of the first choices. In WazirX’s public information, the transaction volume in 2020 is more than 1000% longer than the previous year, and it even indicates that the number of new registered users almost doubles every two to three months.

In this context, in India’s second and third-tier cities, young people aged 25 to 34 are the main force in the Crypto field and have formed some market preferences with local characteristics.

In 2021, due to the government’s regulatory attitude and specific rules are still unclear, many Crypto users turned to Telegram and WhatsApp to participate in transactions, and accounted for 60-80% of the total transaction volume in some specific time intervals.

Another very influential and impetus thing was in May this year when Vitalik Buterin transferred SHIB worth 960 million to the Indian Crypto Anti-epidemic Foundation. After that, India’s SHIB holdings soared, and SHIB once became a hot topic on Indian Twitter. In the Meme market last week, the trading platform WazirX stated that SHIB has replaced Bitcoin as the most traded token in the Indian rupee market, with a trading volume of USD 489 million.

The Crypto concept is still spreading in India. During the Olympics this year, the trading venue Bitbns also launched Crypto-related rewards for Indian athletes participating in the Olympics, and athletes who win medals can receive Crypto as gifts. For example, the gold medalist can get about $2700 in Crypto. This asset will be obtained on the platform after the athlete completes the KYC. In India, the first athletes to receive free awards were weightlifter winner Mirabai Chanu and badminton player PV Sindhu.

This influence and change may bring enlightenment to investors who are concerned about the Indian market. The former Indian region was a more recognized hot spot for investment in gold and precious metals, but when Crypto appeared, the investment process was simplified and the coverage was more extensive. Although the value of digital assets held by Indian investors is still only part of the gold market, some trends have already emerged.

In the future, with the further clarification and improvement of the risks of the Indian government’s regulatory environment and the regulatory rules, it may further affect the development of this industry in the local area.​​​​

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