At a time when enacting a global framework for regulating crypto assets is the talk of the town, a new report by a global crypto research firm shows that developing countries are leading the race to adopt crypto assets.
The latest edition of Chainalysis’ Global Crypto Adoption Index ranks India first in crypto adoption. India is followed by Nigeria and Vietnam. In fact, except for the United States, which ranks 4th, rest of the top 10 list comprise of developing countries.
War-ravaged Ukraine and sanctions-hit Russia, where crypto usage has spiked after the war began in 2022, also feature in the list; Ukraine ranks fifth while Russia is in 13th position.
A major takeaway of this year’s rankings is that countries in Central Asia, South Asia and Oceania dominate the crypto adoption list. Eight out of the top 20 countries belong to this region. All of them are also developing countries.
Developing countries lead crypto race
The report suggests that while crypto adoption has seen a fall in the last one year, the recovery has been led by developing countries. “Lower Middle Income (LMI) is the only category of countries whose total grassroots adoption remains above where it was in the July-September quarter of 2020, just prior to the most recent bull market (in the crypto market),” reads the report.
For those unversed with the term LMI: it is a classification used by the World Bank to club countries, which have a Gross Per Capita National Income between $1,086 and $4,255. It is more often used interchangeably with the term ‘developing countries’.
The report notes that this is significant for the growth of crypto around the world as developing economies “are on the rise, with dynamic, growing industries and populations”.
Speaking to WION, Raj A Kapoor, the founder of India Blockchain Alliance, says that inflation is a major motivation for developing countries to adopt cryptocurrencies. “Cryptocurrencies with a limited supply, as such, are seen as a hedge against inflation. Cryptocurrencies provide an alternative to national currencies that are susceptible to depreciation,” says Kapoor.
Crypto evangelist Sharat Chandra argues that cryptos are seen as a tool for greater financial inclusion in developing countries. “Web3-based games, especially ones with clear play to earn models, and decentralized finance products therefore have gained adoption in developing countries,” Chandra adds.
Interestingly, El Salvador, which made Bitcoin a legal tender in a bid to boost financial inclusion among its unbanked population, is not among the top 20 countries.
Global framework for crypto regulation
The latest crypto adoption ranking comes close on the heels of the G20 declaration endorsing the Financial Stability Board’s recommendations for “the regulation, supervision and oversight of crypto-assets activities and markets”.
Creating a global framework for regulating cryptos was one of the key agendas of the recently-concluded Group of 20 summit, incidentally hosted by India. The number one country in crypto adoption has been flagging concerns relating to the use of crypto assets for money laundering and terror financing.
Agreeing with the concerns raised by India, Kapoor believes that standardised laws may make crypto markets more stable and safer, and also promote better consumer protection.
While regulations and a framework are yet to be finalised, a consensus emerged during the summit that a blanket ban will not be feasible. This is good news for countries in the developing world, especially India, where crypto adoption is deepening each day.
“A regulatory framework will bring in more investments necessary to support startups and entrepreneurs building in Web3 and contribute to the growth of the web3 ecosystem in the country,” says Chandra, adding that India will take the lead in driving the crypto growth story.
Kapoor opines that cryptocurrencies have the potential to provide cost-effective remittances and cross-border transactions. “Cryptocurrencies can promote Decentralized Finance (DeFi) systems for peer-to-peer financial services, eliminating the need for intermediaries,” adds Kapoor, when asked about the potential future crypto use cases.