What is driving India’s cryptocurrency market?

It’s official – India has the largest number of cryptocurrency owners in the world. More than 100 million Indians have invested in cryptocurrency, according to a new report from broker discovery and comparison platform BrokerChooser.

This development should come as no surprise to enthusiastic observers of the booming crypto market in India, which has been on a growth path for some time now. Moreover, India ranks second among 154 countries in terms of adoption, according to the 2021 Global Crypto Adoption Index by Chainalysis. US-based research platform Finder also noted that India was among the top five countries in the world in terms of cryptocurrency adoption.

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Cryptocurrencies are not officially recognized by the Government of India. At the time of writing, a cryptocurrency bill is in the works. However, the legal ambiguity did not deter the millions of curious and tech-savvy young Indians who considered cryptocurrencies as the next big disruption in technology.

Main market drivers

The rise of cryptocurrency in India can be attributed to several factors. As is the case globally, young investors are dominating the market with an appetite for risk and innovation. With an average age of just 29 years, India is home to one of the world’s youngest population. Its residents are also largely digital natives. Young Indians have grown up in an increasingly technology-led world and are navigating the digital world with ease, just like their counterparts elsewhere.

India also has a large technologically skilled workforce owing to a strong technical education infrastructure. The availability of technical talent ensures faster innovation through new technologies. Moreover, India has a strong culture of entrepreneurship and innovation. The massive strides that entrepreneurs have taken in the past decade are a testament to their thirst for achievement.

Cryptocurrency’s capabilities to solve critical challenges will ensure consistent adoption long after the pandemic is over

The COVID-19 pandemic has been another important driver. When the threat of infection forced the world inside, technology helped us stay connected. The past year and a half has seen massive digital adoption, of which cryptocurrencies have been a prominent part. Globally, cryptocurrency adoption grew by a whopping 880% between July 2020 and June 2021, according to Chainalysis. The growth was reversed in India. Between April 2020 and May 2021, investments increased from $923 million to $6.6 billion – impressive growth in just one year.

Cryptocurrency’s capabilities to solve critical challenges will ensure consistent adoption long after the pandemic is over. For example, the absence of traditional banking infrastructure in parts of India has created a need for a digital infrastructure that can enable seamless and accessible banking services. Cryptocurrencies can play an important role in enabling this digital infrastructure as potential currencies in the future, given their immediate and frictionless nature.

Reliance increase

Interest in cryptocurrencies may be growing, but they have not yet reached the mainstream. As with many new technologies, this has a lot to do with the myths surrounding them. For example, a common misconception is that cryptocurrencies make it easy to facilitate illegal activities. In fact, criticism makes it easier for criminals because it is not easily tracked. Digital transactions leave digital breadcrumbs behind — data that allows law enforcement to track them.

Likewise, there have been concerns about the supposed environmental impact of cryptocurrency mining, particularly with Bitcoin. However, bitcoin mining consumes half the energy used in the traditional banking and gold industries, according to a report by Galaxy Digital released in May of this year.

With the right crypto-regulation, India can also attract the capital needed to produce digital assets “Google” and become a global hub for crypto talent.

Along with these myths, steps should be taken to familiarize users with digital assets. There is a large age discrepancy regarding cryptocurrency adoption. Currently, it is led by young investors. Older investors prefer more traditional assets. Encouraging them to become more comfortable with the new technology could be the key to wider adoption. With the growth of successful use cases, the natural demand can increase their desire to learn about cryptocurrencies.

Finally, a crypto regulatory framework that values ​​and encourages innovation can allow India to emerge as a major player in Web 3.0 development. History shows that regulations favoring new and promising technologies enable countries to gain a strong competitive advantage.

In the United States, the Clinton administration introduced the Communications Act of 1996, which allowed private entities to enter the Internet business. It was a historic move that eventually led to the emergence of the world’s largest technology companies.

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Today, the Internet economy accounts for 12% of the United States’ GDP. On the other hand, European tech entrepreneurs found themselves burdened with strict bureaucracy, and many left their homes to set up shop in Silicon Valley. With the right crypto-regulation, India can also attract the capital needed to produce “Google” digital assets and become a global hub for crypto talent.

Cryptocurrencies are set to revolutionize the next decade. Now, with the world’s largest number of cryptocurrency owners and a rapidly growing user base, India is poised to emerge as a major player in this digital asset market.

Kristen Boggiano

Guest author Kristen Boggiano is the president and co-founder of CrossTower, a crypto exchange with capital market potential that enables smart money to push the boundaries of what is possible. Boggiano is a business focused executive and strategic legal advisor with deep experience analyzing the rapidly evolving regulatory landscape related to decentralized finance and digital assets. The opinions expressed in this article are those of the author.

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