According to a report by Chainalysis, there has been a real boom in cryptocurrency use and trading in India over the past year.
India’s small towns are pushing cryptocurrencies forward
Around 15 million Indians have reportedly invested in cryptocurrencies, in a country where citizens are in possession of around 25,000 tonnes of gold, the value of cryptocurrencies from April 2020 to May 2021 rose from $923 million to around $6.6 billion, a growth of 623%.
The country’s largest cryptocurrency platform CoinSwitch Kuber in the last twelve months has reached 6 million users.
But what is perhaps most surprising is that this real boom is taking place not so much in the big cities, but primarily in small towns.
An investigation by the Indian newspaper India Times records data from a small local exchange, Wazirx, which is said to have recorded a 2648% increase in users from small towns.
The profile of the new crypto investor in India is young and with a university degree
The India Times survey also showed the profile of new cryptocurrency investors in India.
The country’s main exchanges have seen a boom in young users, university graduates and those with a fairly high-risk appetite
Wazirx officials interviewed by the newspaper said that their typical user, who lives in small Indian cities, is under 35 years old and mostly has a university degree.
This reflects how the market is ripe for new forms of investment which don’t necessarily have to be the purchase of major cryptocurrencies, but also in new areas such as NFTs and decentralized finance.
Also interesting is the growing number of women investing in cryptocurrencies. In the past year, their number has grown by 15%, bringing the percentage of women investors to 35% of the total.
Great regulatory uncertainty in the country
Despite these figures, however, the cryptocurrency world has to contend with a rather confusing regulatory system.
In 2018 when the interest in the country towards cryptocurrencies started to expand even among the common people, the Indian central bank (RBI) imposed a sort of ban on banks in facilitating and allowing investments and transactions in cryptocurrencies.
It was only in May 2020 that the Supreme Court ordered this ban to be lifted because there was no legal basis for such a measure.
According to some sources, the government is thinking of an ad hoc law to be passed in Parliament that would place severe restrictions on investments in cryptocurrencies and all related activities, including mining, which is quite widespread in India.
The government restricts assets
According to the Indian Finance Minister, the government should severely restrict investments in such risky assets like cryptocurrencies and instead should focus heavily on blockchain technology, which could be revolutionary for the financial sector.
In such an uncertain regulatory framework, the boom that has been taking place in recent months could clearly be short-lived, as is already happening in neighbouring China, where the government has recently imposed severe restrictions on cryptocurrency mining, a lucrative and widespread activity.