India has emerged as a global leader in cryptocurrency adoption, securing the top spot in Chainalysis’s 2024 Global Crypto Adoption Index for the second consecutive year. This is particularly noteworthy given the country’s stringent regulatory requirements, including a 30% tax on crypto gains and a 1% transaction levy. Despite these challenges, India’s crypto market has flourished, driven by a surge in grassroots participation across various regions.
A significant aspect of this growth is the increasing involvement of smaller cities such as Nagpur, Jaipur, and Lucknow. In these non-metro areas, young individuals are turning to crypto trading as a means to supplement their incomes amid limited job opportunities and stagnant wage growth. Trading volumes on major exchanges doubled to $1.9 billion in the October–December quarter of 2024, with a substantial contribution from these cities.
This trend raises a critical question: Is India’s grassroots crypto surge a step toward greater financial inclusion, offering alternative income and investment opportunities to underserved populations? Or does it pose a regulatory challenge, complicating efforts to maintain financial stability and protect consumers in the absence of well-defined legal frameworks?
Drivers of Grassroots Crypto Adoption in India
India is becoming a global leader in cryptocurrency adoption, thanks to a mix of social, economic, and technological changes, particularly in its smaller Tier-2 and Tier-3 cities.
Drivers of Grassroots Crypto Adoption in India
- Limited Job Opportunities and Stagnant Wage Growth
- Increased Smartphone and Internet Penetration
- Low Barriers to Entry with Mobile Crypto Apps and Exchanges
- Influencer Culture and Online Financial Education
- Remittances, Micro-Investing, and Gig Economy Income
Limited Job Opportunities and Stagnant Wage Growth
In smaller cities like Nagpur and Jaipur, limited employment opportunities and stagnant wages have prompted residents to seek alternative streams of income. Cryptocurrency trading and investment have emerged as accessible avenues for financial growth, attracting individuals looking to supplement their earnings.
Increased Smartphone and Internet Penetration
The widespread availability of affordable smartphones and expanding internet connectivity have democratized access to digital financial services. This technological penetration enables residents in remote areas to participate in the crypto economy, bridging the digital divide and fostering financial inclusion.
Low Barriers to Entry with Mobile Crypto Apps and Exchanges
User-friendly mobile applications and crypto exchanges have lowered the entry barriers for new investors, contributing to India’s grassroots crypto surge. Platforms offering intuitive interfaces and localized language support make it easier for individuals with varying levels of financial literacy to engage with cryptocurrencies confidently.
Influencer Culture and Online Financial Education
The proliferation of financial influencers and educational content on platforms like YouTube, Telegram, and WhatsApp has played a pivotal role in spreading crypto literacy and awareness. These channels provide accessible information on trading strategies, market analysis, and investment tips, empowering a new generation of crypto enthusiasts.
Remittances, Micro-Investing, and Gig Economy Income
Cryptocurrencies, particularly stablecoins, have become instrumental in facilitating remittances, micro-investments, and payments within the gig economy. They offer a cost-effective and efficient alternative to traditional banking systems, especially in regions where such services are limited or inefficient.
Together, these factors show how India’s financial landscape is changing, with everyday people turning to crypto not just to face economic challenges, but also as a sign of their adaptability and drive to succeed.
The Financial Inclusion Opportunity
Crypto is unlocking new paths to financial freedom by offering low-cost access to saving, investing, and borrowing tools for people left out of the traditional banking system.
How Crypto Opens Access to Savings, Investment, and Credit Tools
Cryptocurrencies and blockchain remove traditional barriers to financial services, providing borderless, permissionless access to tools for saving, investing, and borrowing. All you need is a smartphone and an internet connection to use crypto wallets, invest in digital assets, or participate in decentralized lending.
Remittances, DeFi Lending, and Small Business Payments
One of the most significant uses of crypto in India is cross-border remittances. In 2024, about 15% of remittances to India were processed via cryptocurrency platforms, showing a clear rise in adoption. The trend is particularly strong among migrant workers, with their use of crypto for remittances growing by 25% in 2023, thanks to platforms like WazirX and Binance that support local currencies.
DeFi platforms also provide accessible microloans to users who lack credit history or collateral, offering a chance to borrow with just a crypto wallet and internet connection. Additionally, small businesses in Tier 2 and Tier 3 cities are exploring crypto payments for international customers, reducing reliance on expensive payment processors.
Empowering the Unbanked and Underbanked
Approximately 190 million Indian adults remain unbanked or underbanked, often due to expensive or inaccessible financial services. Crypto offers an alternative, enabling these individuals to store funds securely, conduct transactions without intermediaries, and establish financial identities using on-chain data. This paves the way for greater economic participation and stability.
Potential to Drive Digital Financial Literacy and Entrepreneurship
As crypto adoption grows in India, it’s fostering financial education and entrepreneurial thinking. People are learning about blockchain, experimenting with NFTs, and launching DeFi projects.
This ecosystem is empowering self-taught entrepreneurs, freelancers, and content creators, enabling them to monetise globally without needing traditional banking or venture capital.
The Regulatory Dilemma
India’s grassroots crypto surge is marked by regulatory uncertainty, with the government imposing high taxes while refraining from officially recognising or banning cryptocurrencies, creating a complex environment for both investors and innovators.
India’s Unclear Crypto Stance: High Taxes, No Legal Tender, Yet No Ban
India’s approach to cryptocurrency remains unclear and inconsistent. While the Reserve Bank of India (RBI) does not recognise crypto as legal tender, it has not banned it outright. This creates confusion for investors and businesses.
The government has imposed high taxes on crypto transactions, treating them like commodities or assets. However, the lack of clear regulations prevents crypto from being formally recognised as a legitimate financial tool, leaving the sector in a state of uncertainty.
Concerns About Scams, Fraud, and Money Laundering
A major reason behind the RBI’s hesitation to fully accept cryptocurrencies is the concern about scams, fraud, and money laundering. The decentralized and anonymous nature of crypto makes it harder to track illicit activities.
High-profile scams, such as Ponzi schemes and fake exchanges, have raised alarms, leading to calls for stricter regulations and better consumer protection. Despite the industry’s growth, these concerns continue to be a significant barrier to widespread adoption.
RBI’s Caution vs. Growing Market Demand
The RBI has voiced concerns about cryptocurrencies potentially destabilizing the economy, particularly through capital outflows and increased volatility. Despite growing demand, especially in sectors like remittances and among young, tech-savvy users, the central bank has maintained a cautious approach.
In 2018, the RBI banned crypto transactions through banks; however, the Supreme Court overturned this ban in 2020. Still, the RBI’s stance continues to favour regulation over full acceptance.
Struggles to Differentiate Innovation from Risk at the Grassroots Level
At the grassroots level, many Indians see crypto as a tool for financial empowerment. However, the lack of clear regulations makes it difficult to distinguish between legitimate innovation and high-risk investments.
Without clear guidelines, users are vulnerable to unregulated platforms and scams. This is especially concerning for individuals in smaller cities who may not fully understand the complexities of crypto, leaving them vulnerable to potential financial losses.
How Regulatory Uncertainty Could Stifle Innovation or Push Activity Underground
The ongoing regulatory uncertainty is stifling innovation in India’s crypto space. Developers and entrepreneurs, unsure of the legal consequences of launching crypto-related products, may choose to operate in more crypto-friendly countries.
Alternatively, this lack of clarity could push crypto activities underground, leading individuals and businesses to move their operations to less regulated regions. This not only harms India’s potential to lead in the blockchain and crypto industry but also raises the risk of untraceable criminal activities.
What Needs to Happen Next
To foster a secure and innovative cryptocurrency ecosystem in India, several key steps are essential:
- Implement Clear, Tiered Regulations: Establish multi-tiered regulatory requirements that differentiates between various cryptocurrency use cases, such as trading, lending, and remittances, to ensure appropriate oversight and compliance.
- Enhance Education, Consumer Protection, and Transparency: Develop comprehensive educational initiatives to inform users about the risks and benefits of cryptocurrencies, while enforcing strict consumer protection laws and promoting transparency within the industry.
- Create a Regulatory Sandbox for Innovation: Establish a controlled environment where fintech and crypto startups can test new products and services under regulatory supervision, facilitating innovation while ensuring compliance with legal standards.
- Encourage Local Crypto Projects and Exchanges to Comply and Educate: Support domestic cryptocurrency platforms in adhering to regulatory requirements and actively participating in educational efforts to promote safe and informed usage among users.
- Promote Global Coordination to Regulate Crypto Without Cutting Off Access: Engage in international dialogues and collaborations to harmonize cryptocurrency regulations, ensuring that India remains integrated into the global digital economy while maintaining robust oversight.
By implementing these measures, India can create a balanced and forward-thinking regulatory environment that supports innovation, protects consumers, and positions the country as a leader in the global crypto space.
Final Thoughts
India’s grassroots crypto surge holds significant potential for financial inclusion, particularly in smaller cities like Nagpur and Jaipur. With limited access to traditional banking, many unbanked and underbanked individuals can now tap into crypto for savings, investment, and even micro-lending. This movement could empower millions, driving digital literacy and economic participation in underserved regions.
However, the country’s uncertain regulatory stance poses a challenge. While the demand for crypto grows, the lack of clear policies, alongside concerns about scams and money laundering, could inhibit innovation. Without a supportive framework, crypto adoption risks being pushed underground or left in legal limbo, preventing the full benefits from being realized.
Ultimately, whether this movement succeeds depends on how regulators respond. Smart, progressive regulation is key to fostering financial inclusion while ensuring security and stability. India should aim to regulate with foresight, not fear, to fully unlock crypto’s potential for empowerment and economic growth.
Disclaimer: This article is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.
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