As India’s crypto market faces legal and other hurdles, it fell from the second to fourth spot in the 2022 Global Crypto Adoption Index, crypto analysis firm Chainalysis said in a report.
The index tracks countries adopting cryptocurrencies or investing in the digital assets. The study finds that India’s crypto adoption at the grassroots level was higher than the US, ranked fifth on the index.
Crypto Taxation In India
Indian traders were switching to global crypto exchanges, as sign-ups on Binance's crypto app have skyrocketed after India introduced 1 per cent tax on deduction (TDS) on crypto transactions, Bloomberg reported. The daily crypto volumes on major India-based platforms dropped by more than 90 per cent after the 1 per cent levy on crypto transactions went into force in July, the report said.
India has categorised cryptocurrency as virtual digital assets (VDA), and profits generated from crypto transactions fall under the 30 per cent tax bracket. In addition, if the transaction amount exceeds Rs. 10,000 in a fiscal year, a 1 per cent tax (TDS) is deducted at source, as per the rules.
Crackdown On Crypto Exchanges
The crackdown on crypto exchanges by Indian authorities has also been cited as one of the reasons for traders switching to global exchanges, especially after the controversy over fake Chinese loan apps.
These apps provided loans on high interest rates to borrowers without taking collaterals, and resorted to unlawful practices to extract the money when they were unable to pay back.
Emerging Markets Dominate The List
People in the lower- and upper-middle-income brackets in emerging markets are investing more on cryptocurrencies than their counterparts in developed nations.
"Users in lower middle- and upper-middle-income countries often rely on cryptocurrency to send remittances, preserve their savings in times of fiat currency volatility, and fulfil other financial needs unique to their economies. These countries also tend to lean on Bitcoin and stablecoins more than other countries," the Chainalysis report said.
Global Crypto Adoption Remains High
While growth has become irregular amid the current bear market, the global cryptocurrency adoption rate remains significantly higher compared the 2020 bull market phase. A significant number of people who invest in cryptocurrencies during periods of price increase tend to stick around even when the prices fall, allowing the ecosystem to grow across market cycles, the report added.