In what appears to be the result of heavy taxation on cryptocurrencies and regulatory uncertainty, India slid two places to the fourth rank on the Global Crypto Adoption Index released by Chainalysis.
Trailing Vietnam, Philippines and Ukraine, India scored 0.663 on the overall index score. In totality, crypto adoption rankings were largely led by emerging markets.
India clinched the numero uno position in three sub-rankings – centralised service value received ranking, retail centralised service value received ranking, and DeFi value received ranking. The gains were, however, offset by poor performance in the peer-to-peer (P2P) exchange trade volume, where India came 82nd out of 154 countries.
Exploring the findings, the report said that the popularity of cryptocurrencies, especially in the lower-middle and upper-middle income countries, could likely be attributed to heavy reliance on the digital currencies to send remittances and its emergence as a newer investment option amid rising rates.
The disclosures were part of the 2022 Global Crypto Adoption Index released by the consultancy firm Chainalysis. In the last edition of the index, India stood at second position, just behind Vietnam.
The 2022 index took into account five sub-indices and ranked 146 countries on those metrics. The scores were then normalised on a scale of 0 to 1, which were then used to determine the rankings.
The index also added two new sub-indices based on DeFi transaction volume and modified two other sub-indices to effectively gauge the usage of crypto services in the surveyed countries .
Another major takeaway of the report was that the growth in global adoption rate of cryptocurrencies has tapered off in the last one year. While taking note of the fact that the adoption had plummeted due to crypto winter, the report reiterated that the global adoption remains well above the pre-bull market levels of 2019.
“Global adoption of cryptocurrency reached its current all-time high in Q2 2021. Since then, adoption has moved in waves – it fell in Q3, which saw crypto price declines, rebounded in Q4 when we saw prices rebound to new all-time highs, and has fallen in each of the last two quarters as we’ve entered a bear market. Still, it’s important to note that global adoption remains well above its pre-bull market 2019 levels,” said the report.
The Growth Tapers Off
While India more or less led the ratings last year, something appears to have changed this year. An implicit crackdown by the government coupled with explicit warnings by the Reserve Bank of India (RBI) appear to have played a spoilsport for the industry.
The excessive taxation regime deployed by the union government appears to have dissuaded users from investing in cryptocurrencies. Earlier this year, the government imposed a 30% tax on income from crypto transactions and later implemented a 1% TDS on such transactions.
While the RBI top brass has called cryptocurrencies a threat to India’s macroeconomic stability and sought a ban on it, Finance Minister Nirmala Sitharaman has called for global crypto regulations.
Besides, there has been a major crackdown on crypto startups in the country. The Enforcement Directorate (ED) has raided and launched a slew of investigations into exchanges, including WazirX, Vauld, and CoinSwitch Kuber, for allegedly flouting money laundering norms.
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