It is not a surprise to see many investors concerned about the future of India’s crypto market, especially after the country recently updated its regulations. Actually, some research institutions believe that these regulations might negatively affect the industry. Statista, for example, expects the industry’s total revenue to drop by about 2.44% between now and next year.
Other research institutions believe that the industry might continue growing, given that the country just led global crypto adoption for the second straight year. So, it makes sense to be really concerned about what the future holds for India’s crypto sector. Let us look at a few highlights.
The role of technology
Technology has just a way of making life better – that you cannot dispute. For instance, mobile phones allow you to access different services on the go with just a simple touch of a button. You don’t have to wait until you have reached a specific location for you to get started. According to Data For India, at least 82% of Indians use and own mobile devices. That means that more individuals can now access cryptocurrency platforms easily and invest.
The appeal of blockchain technology is another reason for crypto’s continued adoption in the country. Perhaps you have heard about its decentralized nature, which can greatly enhance security, privacy, and so on. We are living in a time when cybercrimes are on the rise, so you want to ensure that you are as safe as possible.
Can you imagine that the Indian Cybercrime Coordination Centre actually reported about 7000 cybercrime complaints in May 2024 alone? That is why we may see more Indian businesses adopting blockchain-based technologies that tend to be more secure than traditional counterparts to stay relevant.
An Etedge Insights report revealed that India was ahead of more than 150 countries in terms of DeFi adoption and that 17.6% of the Indian crypto investments were organized in DeFi utility tokens. And well, who does not mind saving some coins by avoiding middlemen? This and other benefits like better programmability and transparency could lead to the further spread of digital currencies in the country.
Will the need for a more financially inclusive society drive further spread?
Can you imagine that, according to a recent Medium report, about 190 million Indians do not have access to formal banking services? That means that even if you were to send them money from abroad, you’d have to use an alternative means to banks. Digital currencies are quite fast and cheap and do not need you to have a bank account.
And thankfully, there is such a growing digital financial literacy and internet penetration in the country that it might create a conducive environment for the crypto industry. A recent report revealed that the number of internet users rose by 19 million from January 2023 to a similar time this year. As of 2024, the internet penetration rate stands at more than 52% and will continue increasing in the coming days, which might enhance access to crypto services.
Traditional banking systems often fail to fully reach people because of geographic and economic barriers, but not anymore with digital currencies. Platforms like Polygon are now the center of using blockchain solutions to offer low-cost financial experiences.
Challenges facing this sector
About three years ago, crypto seemed to be doing well in India. But as time went by, things changed significantly. In 2023, the industry marked a bear season due to market downturns and imposition of high taxes by the government.
Participants were expected to pay a 30% tax rate and a 1% tax deducted at source (TDS). Some studies reveal that the TDS imposed on securities transactions actually resulted in a 95% plunge in trading volumes. Most traders were shifting to offshore platforms to avoid paying high taxes.
If we were to look at the numbers, Esya Centre found that about three to five million investors shifted from domestic to foreign exchanges, resulting in a $3.8 billion loss for local platforms. And even though investors have shown some resurgence in trading activity, Indian exchanges still have the challenge of taking advantage of this renewed interest to regain lost ground.
What’s more, the country’s move to block foreign crypto exchanges could affect investor confidence. And as you may know, a good number of individuals do not actually participate in this industry because of trust issues. Pew Research Center conducted a study in America and found that about 63% were skeptical about the safety of cryptocurrencies. Just a few months ago, Binance resumed its full operations in the nation, but after paying a huge fine of $2.25 million.
Wrapping up
Who does not want to ensure that he interacts in a safe, private, and transparent ecosystem in a world where cyber threats are becoming the order of the day? Fortunately, these are just some of the benefits of digital currencies, which explains why many industries and countries have been opening up to crypto.
But in India, things have been a bit complex. Just last year, the country introduced taxes that negatively affected the industry. Surprisingly, that did not seem to be the end of digital currencies, as the country has recently topped the charts for global crypto adoption. Therefore, it might really be difficult to project what exactly this industry will look like in the future, so all we can do is just watch.
