Hostile regulatory environments are seeing crypto adoption in India and Pakistan drop sharply, a new Chainalysis report reveals.
India, once home to the second-largest crypto-loving demographic in the world, has seen its crypto adoption ranking drop to fourth place year-on-year, according to a 2022 Chainalysis report. Its neighbor Pakistan is now the country with the sixth highest crypto adoption rate in the world, falling three places in the same period.
According to the report, most Indian transactions involve ETH or wrapped ETH, while most Pakistani transactions use stablecoins as carriers of value for remittances. An ETH can be converted into an ERC-20 token like wETH in a 1:1 ratio for use in decentralized applications and NFT marketplaces.
In both countries, blockchain companies in the field of remittances are beginning to disrupt the market, worth more than $40 billion cumulatively. The Pakistani government recently partnered with AliPay to receive funds from Malaysia.
Strict taxes reduce Indian trade volumes.
Two new taxes introduced this year caused India’s ranking to drop.
Indian crypto exchanges were hit hard by the government’s 30% tax on cryptocurrency revenue in April 2022. Local media estimated a 15-55% drop in trading volumes in the days that followed. followed. Internet traffic to crypto exchanges has dropped by 40%.
WazirX, an Indian exchange that face probes earlier this year by the Law Enforcement Directorate of India, seen its trading volume fell from $208 million to just under $100 million before the new law took effect. An additional withholding tax of 1% came into force on July 1, 2022.
Despite the declines, an industry executive is still optimistic.
According Vikram Rangala of the Indian exchange ZebPay, “India has dozens of [crypto] projects working on establishing property rights, access to tickets and membership cards, helping rural artisans monetize, even giving token holders the chance to “go skydiving with a star of cinema in Dubai”, and more.
He also offered a theory on the government’s reasoning: “From conversations my colleagues and I have had, members of the Indian government, including MPs, are not per se anti-crypto. Some are very pro-crypto. But they fear their constituents are trading a volatile asset without adequate information. You can’t see any official supporting something that is so risky for most people. “
On the other hand, the Pakistani government has yet to rule on the legality of cryptocurrencies. The central bank and the government recommended a complete ban on cryptocurrencies in January 2022. After that, the government formed three sub-committees to help implement the policies.
To complicate matters, the country is added to the Financial Action Task Force’s gray list, limiting the country’s ability to obtain financial aid.
Central bank governor Reza Baqir said in February 2022 that the disadvantages of cryptocurrencies outweigh their advantages.
Overall, NFTs and stablecoins make up the bulk of crypto volume
Vietnam took the top spot in Chainalysis’ Crypto Adoption Index for the second year, while the Philippines ranked second. Both can attribute their high rankings to the penetration of play-to-earn (P2E) games like Axie Infinity that require the use of NFT, as well as to stablecoin remittances.
According to Manan Vora, a senior Liminal official, a Singaporean crypto wallet infrastructure provider, stablecoins offer children who send money to their parents in Vietnam and the Philippines a cheaper way to transact.
“Why pay 3% to a bank intermediary and wait two days for the funds to reach them when USDT/USDC can reach them in a minute, with almost zero fees?” he said.
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