Why is crypto so big in developing countries?

It can be clearly seen that crypto adoption is very successful in many developing countries around the world. As inflation continues to run out of control, many citizens lose faith in the local currency and economic policies and are often driven to find alternative methods of earning, saving and spending money. The crypto market not only offers the dream of making money and getting rich, but also helps its citizens to protect their wealth by keeping it in crypto instead of their local currency.

Some of these countries include, for example, El Salvador, which created bitcoin (BTC-USD) its legal tender in September 2021, and Nigeria, where as of April 2022, some 33.4 million residents were recorded as trading or owning cryptoassets despite restrictions on cryptocurrency transactions by the Central Bank of Nigeria (CBN). It was also estimated in the Philippines that over 4.3 million people (4.0% of the total population) currently own cryptocurrency.

The crypto state of India

According to a recent survey by KuCoin, The Cryptoverse India Report mentioned that during the first half of 2022, around 115 million Indian citizens aged between 18-60 had either traded or held cryptocurrencies. Despite 2022 being extremely difficult for the crypto market, the survey also showed that in the last quarter, young investors remained more interested in crypto compared to older investors. Therefore, the number of crypto investors aged 18 to 30 increased by 7% year-on-year.

Furthermore, the KuCoin survey also revealed that 56% of investors believe crypto could be the future of finance, and 52% have already invested in crypto to earn a passive income that can help them improve their quality of life.

The Indian government, like other governments around the world that have less control and oversight over crypto transactions and citizens’ capital, is concerned about how much money is escaping the local monetary system and entering the crypto world. This has led the Indian regulator to enforce one of the strictest crypto regulations in the world, and as of April 2022, there is a 30% tax on unrealized crypto gains, while users are also charged a 1% tax per transaction.

China, for example, took it one step further and went to the extreme of completely banning the use of cryptocurrencies in investment, trading, mining and other related activities, allowing only the digital yuan. Digital Yuan is a CBDC (Central Bank Digital Currency) and is controlled by the government.

The heavy hand of the Indian regulator was also felt by the local exchanges when Wazrix, the largest cryptocurrency exchange platform in India, with more than 10 million users, came under the Enforcement Directorate freezing accounts. This led to a drop of over 54% in trading volume during the first days of August 2022. This drop caused trading volume to drop dramatically from $4.3 million to $2 million. At the end of last year, Wazrix had a trading volume of 43 billion dollars.

Despite the government’s tough stance on digital assets, the report stated that the Indian crypto-technology market is expected to reach $241 million by 2030, and that younger investors will recognize the long-term value of crypto.

Mohit Kumar, a long-term cryptocurrency investor in Delhi, said, “Honestly, crypto made a backdoor entry in India through [Union] Budget 2022. And there is no going back now. I don’t care about the 30% slab as I hold crypto for a long term vision and by then I expect a lot of changes in tax slabs so let’s relax. The good thing is that it is not prohibited.” “I still want to invest,” he said CoinGeek in February.

Kumar also stated that executing anything new in India takes a long time and tracking traders seems to be an incredibly difficult task for the authorities. Kumar also said, “They will not be able to trace them. The exchanges will be required to report every transaction and exchange rate in a crystal clear manner and the authorities may or may not, time will tell.”

Conclusion: Crypto is on the rise and only getting stronger

Despite the government’s efforts to make it more difficult for citizens of India to trade and hold cryptocurrencies, crypto enthusiasts seem determined to continue and invest in this new and upcoming market.

Delving a little deeper into the survey, 41% of respondents cited the lack of education about the crypto market as a barrier to their investment, adding that they don’t know how to choose between the many different cryptocurrency products available. Around 37% said they did not know how to manage portfolio risk, while 27% said they did not have the right knowledge and tools to predict market movements. 21% were not even clear on how crypto works at all.

2023 is set to be the busiest year yet in terms of regulations for the crypto market worldwide. I believe that these regulations may slow down the market initially, but will ultimately prepare it for the next stage of growth. Looking forward, five to ten years from now, I am very optimistic that the mass adoption of cryptos will continue and grow globally and in developing countries like India.

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