India Leads Crypto Adoption for Second Year Despite Regulatory Challenges and Taxes

• India tops the global cryptocurrency adoption index for two consecutive years, showing resilience despite strict regulations.
• Binance and KuCoin faced fines in India but remain key players as the country slowly rolls back some crypto restrictions.
• Seven of the top 20 countries in crypto adoption are in Central and South Asia, including India, Indonesia, and Vietnam.

India has maintained its top position in global cryptocurrency adoption for the second consecutive year, according to a new report from blockchain analytics company Chainalysis. Despite stringent regulations and high trading taxes, Indian investors have continued to embrace digital assets from June 2023 to July 2024, leading in several adoption metrics.

Strong Adoption Despite Regulatory Challenges

Since 2018, India has enforced a tough stance on cryptocurrencies, with the Financial Intelligence Unit (FIU) issuing show-cause notices to nine offshore exchanges in December 2023 due to non-compliance with local laws. 

However, the Chainalysis report highlights that India ranked particularly high in the use of centralized exchanges and decentralized finance (DeFi) assets. Notably, these restrictions have not deterred new participants in the market, as investors found alternative means to engage in crypto services not fully banned by the government.

Eric Jardine, Chainalysis’ research lead, observed,

India’s adoption spread is wide across various crypto assets despite limitations, suggesting that even with restrictions, new participants have joined the market.

He added that with some restrictions beginning to ease, such as those affecting Binance, crypto adoption is likely to grow even further.

Binance and KuCoin’s Penalties and Registration

Amid India’s regulatory hurdles, Binance, the world’s largest crypto exchange, was fined 188.2 million rupees ($2.25 million) in June 2024. This fine came just one month after Binance officially registered with the FIU, marking an effort to resume its operations within the country. 

Similarly, another exchange, KuCoin, registered with the FIU in March, but faced a smaller penalty of 3.45 million rupees for non-compliance. These actions reflect the increasing tension between regulators and exchanges but have also opened the door for potential expansion of crypto services in the country.

Asia Dominates Crypto Adoption Rankings

India’s leadership in cryptocurrency adoption is part of a broader trend in Asia, with seven out of the top 20 countries in Chainalysis’ global adoption index hailing from Central and South Asia. 

Countries such as Indonesia, Vietnam, and the Philippines are also at the forefront of this adoption wave. Retail-sized transactions, specifically those under $10,000, were notably high in countries with lower purchasing power, driving decentralized transaction volumes.

In Indonesia, crypto trading remains robust, even as the country bans the use of digital assets as payment. Instead, Indonesians are turning to crypto as an investment platform, with the nation recording $157.1 billion in inflows from digital asset trading over the past year. This trend resembles India’s resilience and enthusiasm for cryptocurrency, despite regulatory pressures.