India is the new cryptocurrency hub, and here's what is powering the craze

India is slowly becoming a new hub for cryptocurrency globally and the demography which is driving this growth is primarily the millennials and Generation Z, data shared by crypto exchanges CoinSwitch Kuber and WazirX exclusively with BusinessToday.In shows.

Also importantly, the data shows that along with metro cities, crypto adoption has gained pace even in India’s Tier-2 and Tier-3 cities, indicating wider acceptability for these digital tokens. And this growth is occurring despite the fact that there is still no regulatory clarity from the government over the fate of these digital currencies.

“This is a very refreshing change that is presently underway. When we first launched the company in 2017, we thought that most of our users would come primarily from metro cities. But we were proved wrong very soon,” says Ashish Singhal, co-founder and CEO of CoinSwitch Kuber to BusinessToday.In.

According to Singhal, within the first six months of the portal’s launch, they saw that at least 55 per cent of users were starting to come from India’s Tier-2 and Tier-3 cities, and now, according to Singhal, the platform caters to users from at least 4000 cities across the country.

A similar picture emerges when we see this data point in conjunction with the data provided to Business Today by another popular crypto exchange portal, WazirX. According to the company, this year, smaller towns and cities have completely overtaken their metro counterparts when it comes to user signups on the platform. In 2021, WazirX witnessed 55 per cent of the total user signups arriving from Tier-2 and Tier-3 cities.

And what makes this truly interesting is that most of the users from India who are investing in cryptocurrencies have an average age of 25 years. “A question to ask at this point is who these users really are? And the answer is that these are very young users. At CoinSwitch, 50 to 60 per cent of users trading and investing are less than 28 years of age, with 25 being the average age,” Singhal says.

Similarly, from WazirX, the average age of users who use the platform are the youth who are at least below 35 years old. “While the youth who are either 35 years or below are the primary demographics for WazirX, but in that also the 22-25 age group is the ones who are most active,” says Nischal Shetty, founder and CEO of WazirX.

For the Mumbai-based crypto exchange, the growth primarily happened this year. “See when we entered January of 2021, we had almost 1 million users. And that took us over 3 years to get there. Then around 10 months later, we now have about 8.5 million users, which is almost 8x jump in such a short span of time,” Shetty adds.

WazirX’s data has another interesting point, a finding which doesn’t really get highlighted all that much when speaking about cryptocurrency. And this is about the involvement of women.

Ever since March 2020 when the Supreme Court overturned the Reserve Bank of India’s 2018 circular which effectively had banned cryptocurrencies in India, women’s participation and adoption of crypto has surged dramatically. WazirX’s data pegs the percentage rise of women crypto investors at a whopping 135 per cent. This is not all.

According to Shetty, while Tier-II cities like Ahmedabad, Lucknow, and Patna have reported average growth of 2,950 per cent, with Tier-3 cities, such as Ranchi, Imphal, and Mohali following closely. And, women from these regions contribute to 65 per cent of the total signups by women from all over the country. The overall percentage of women in crypto stands at 15 per cent, of which 63 per cent of women traders are less than 34 years and 82 per cent of women traders are less than 44 years.

 
In fact, the data from the two exchanges is further buttressed by a report released as recently as last week by the broker portal, BrokerChooser. According to this report, India right now has the highest number of cryptocurrency owners in the world, followed by the US and Russia, but the gap between the three is huge. The report pegs the number of Indian crypto owners at 10 crores. The US, in contrast, has 2.74 crore owners, and Russia has 1.74.

Why crypto?

So, what kind of story is this demographic data telling us with regard to the adoption of cryptocurrency in India?

According to CoinSwitch’s Singhal — whose company turned unicorn just a few days ago — crypto has a higher adoption rate among the young because this particular demographic is plugged onto the internet through their phones, they are reading about cryptocurrencies on the web, and there is a general curiosity around it.

However, an important point to note here is that given the young demographic, this is also the age bracket of individuals who are either entering the job market for the first time or are those who have just started their careers.

In that way, the disposable income for this group isn’t much. So, what is it about crypto that is making these virtual tokens so attractive for the youth? “Simple answer: it is cheap,” says Singhal.

He explains that when it comes to other asset classes, like for instance, mutual funds, the entry barrier is high because the minimum amount to invest is higher. Not so for cryptocurrencies where a token can be bought for as low as Rs 100.

“See, it is not possible for everyone to invest in some other asset classes, like say mutual funds, for which the minimum is at least Rs 5000. And investments are usually about learnings, right? Once you start investing, then you can do more, learn more, and progress further. Hence crypto fits in well. 70 per cent of our users have not invested in anything beyond fixed deposits. So crypto is the first asset class they are getting into,” Singhal argues.

For WazirX’s Shetty, there is another advantage that cryptos have, and that is flexibility. “Cryptos are available 24/7, and the user can invest in it, or withdraw, at their own convenience. This flexible nature of cryptos is a big attractive point amongst users,” he says.

For Shetty, there are several other reasons as well. “Look, when it comes to other asset classes, the young cannot be the early movers. Take the stock market, for instance. There is already a large cohort of people with at least 20-30 years of experience, who are part of that market. In crypto, apart from its flexibility, the average experience a user has is 2-3 years. So, this is not a crowded market and there is the advantage to be an early mover here,” says Shetty.
 
What next?
 
While the cryptocurrency market in India at the moment is primarily retail-driven, there is a growing consensus within the industry that once the government gives regulatory clarity, crypto can see the involvement of not just banks, but also many other institutional investors.

Singhal concurs with this view. He argues that one only needs to look at the situation in the US where very recently the Securities and Exchange Commission (SEC) had greenlighted crypto-based exchange-traded funds (ETFs), and on October 19 the country saw the first-ever Bitcoin futures-based ETFs being traded, an event that sent the price of the digital token soaring where it reached a six-month high. The very next day, the rally had pushed Bitcoin to its lifetime high, touching upwards of $66,000, clocking over 3 per cent gains within a short span of a day.
 
“Acceptance of ETFs is the first step towards institutionalising crypto,” Singhal says. “Let me give you an example, earlier in the day when we bought gold, people would buy bricks or coins, then pay for storage, and make sure nobody steals it. So, it was a lot of headache. Then, with the arrival of gold ETFs, what happens is that now without holding that underlying asset one can still invest in that asset class. This led to a lot of institutional investors rushing to invest in it. Similar is the case we are seeing with crypto.” Singhal, however, feels that the rise of institutional investors will not drive away retail investors.

“Institutionalising crypto will only help drive up retail adoption. Because it means there will be an added layer of trust. Right now, the crypto retail market is around 15 to 16 million users, which is not that large. What this will help in is that it will give more avenues for users to get into crypto. Banks will come in, brokerage houses will join, and all these will only give multiple options in the hands of the users,” he says.

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