The crypto industry in India has been growing by leaps and bounds despite the looming gray cloud of regulatory uncertainty, a new study says. The crypto market size in India has increased 39% from US$53.1 million in FY2020 to US$74.2 million in FY2021, the research shows. The study was conducted by the National Association of Software and Service Companies (NASSCOM) and crypto exchange WazirX.

Between 2019 and 2020, retail ownership of crypto assets by value increased 612%, while the number of retail investors have more than doubled from 7 million last year to 15 million in 2021, the report states. This means that roughly 1.8% of the adult Indian population has invested in cryptocurrencies. 

This is one of the first studies that points to the number of crypto investors as well as startups in India. The government had previously admitted that it did not have any data on the number of crypto investors, exchanges or tax collected from crypto income. 

The findings corroborate the enormous increase in new user signups reported by crypto exchanges including WazirX and CoinDCX. Last month, WazirX said new user signups on its platform have increased by over 2,000%. New sign ups from small towns and cities increased 2,648% this year, WazirX said. In fact small towns and cities have been leading the charge in crypto adoption, representing 55% of all user sign ups on WazirX. 

More importantly, women from the small towns and cities are overtaking their urban counterparts to adopt crypto — these small-town female traders represent 65% of the total women sign ups on WazirX. The exchange claims to have over 7.3 million users on its platform and has handled trading volumes of over US$20 billion this year. 

CoinDCX, which became India’s first crypto unicorn this year, has also seen massive growth in new user sign ups. The exchange claims to have 3.5 million users and doubled its user base between June and August 2021. Earlier this year, CoinSwitch Kuber claimed to have become the largest exchange in the country in terms of number of users with over 10 million customers. 

According to the report, Indians have invested US$6.6 billion in crypto assets whose market cap has crossed US$40 billion this year. Driven by the demand for cryptocurrencies in the country, Indian crypto startups have also registered massive growth. There are currently over 230 crypto startups and more than 150 proof-of-concepts and projects in the country that employ 50,000 Indians. These startups have registered 40% to 50% growth in revenue over the last two years, outpacing the 10% to 11% revenue growth in the wider technology sector. 

These startups have been increasingly attracting institutional funding with Silicon Valley titans including Mark Cuban, Peter Thiel and Tim Draper pouring big money into the sector. According to the study, institutional funding of Indian crypto startups has increased 8.1x between 2019 and 2021. 

Along with investments, the country is also attracting foreign exchanges to set up shop in India. Binance was the first international exchange to enter the market in 2019 when it acquired WazirX. Earlier this month, U.S.-based capital market-focused exchange CrossTower entered India

The robust growth of crypto startups and businesses is set to increase the market size to US$241 million and create over 800,000 jobs in India by 2030, the study claims. This growth, in turn, will create an economic value addition of US$184 billion in the form of investments and cost savings in India by 2030, the report says. Around US$105 billion will be invested in the Indian crypto sector while reduced remittance costs will lead to approximately US$79 billion in savings by 2030, the report claims. 

“Crypto tech industry in India has not only demonstrated a positive impact at the grassroots levels but is emerging as the fastest-growing technology sub-sector,” said Debjani Ghosh, President at NASSCOM. “India provides the most unique ecosystem to crypto tech to play a transformative role in strengthening key priority areas such as healthcare, safety, digital identification, trade and finance, and remittances and help in addressing pandemic-induced challenges.”

But the rapid growth forecasts work under the assumption that crypto will not be banned in the country. Rumours of a crypto ban has haunted the sector for years and with a crypto bill awaiting cabinet approval, the regulatory uncertainty has persisted. 

The country’s central bank has been actively calling for cryptocurrencies to be prohibited, especially for payments. The country’s largest banks have also been pulling away from cryptocurrency businesses and imposing their own bans on crypto transactions. While this has limited the payment options for crypto traders, they have found ways to work around these restrictions by trading through peer-to-peer transfers and other methods. 

Despite the Reserve Bank of India’s strong stance against crypto, finance minister Nirmala Sitharaman has reiterated over time that crypto businesses will have a window of opportunity. As recently as last week, Sitharaman said that though the country is not in a position to accept cryptocurrencies as legal tender like El Salvador, it cannot afford to shut out cryptocurrencies altogether. 

The latest developments suggest the government is looking to classify crypto as commodities in the asset class. Last week, the government set up a committee to examine how crypto income could be taxed. The panel is scheduled to submit its report in three weeks. If the crypto bill receives cabinet nod by November, it will be tabled for discussion in the winter session of parliament.