Indian Web3 Market Overview
Will India lead the future of Web3?
India's web3 market has been thriving due to its 1) young median age, 2) large population size, and 3) high development capabilities. Chainalysis has ranked India as the number one country for crypto adoption.
In particular, it has a thriving startup environment and a high rate of unicorn firms. With the government's relaxation of regulations, it is expected to continue its success in the web3 market.
Many global companies are targeting India to capitalize on this environment, and Bengaluru in particular is playing an important role in the country's web3 market.
India and the growing Web3 market
High-potential web3 markets have three main characteristics. 1) young median age, 2) large population size, and 3) high development capacity. These three factors are fundamental to the successful adoption and proliferation of web3, and India fulfills the requirements for this growth potential.
Young demographic: A younger population means quicker adoption and enthusiasm for new technologies. India's median age is around 28 years old, making it a more youthful country than Indonesia (30) or Vietnam (32). This younger demographic has the highest level of interest and desire for new technologies like web3, as evidenced by the fact that 89% of Indian crypto investors are between the ages of 18 and 35.
Large population size: A large population size is necessary for the growth and proliferation of the web3 market. With over 1.4 billion people, India is one of the most populous countries in the world. Of this large population, only about 8% of the population owns cryptocurrencies, so there is still a lot of growth potential for web3 technology in India.
High development capacity: Success in the Web3 market is not just about user growth, but also about the ability to develop web3 infrastructure and services in-house. India has excellent engineering schools and technical talent with approximately 9.75 million developers. Many have already developed a number of web3 services and solutions based on their high development capabilities. Projects such as Polygon are a testament to India's web3 development capabilities.
Furthermore, India has emerged as a strong candidate to become a leader in the Web3 market, ranking first in Chainalysis' 2023 Global Cryptocurrency Adoption Index (#4 in 22, up 3 levels). As we've covered in our previous research, the cryptocurrency adoption index is weighted based on a country's income, so it's hard to rely on it completely. However, with Hashed Emergent already investing in India and OKX planning to enter the country, market leaders expect India to become a bigger player in the web3 market in the near future. According to IMARC Group, the Indian web3 market is expected to grow at a compound annual growth rate (CAGR) of 11.7% from 2023-2028. India is poised to drive the future of the web3 market, but there are hidden drivers beyond these three essentials.
Startup environment: A Web3 market driven by the younger generation
India's younger generation is rapidly embracing digital technology and expanding the startup ecosystem based on various IT technologies such as AI and blockchain. Notably, Rajeev Chandrasekhar, India's Minister of Electronics and Information Technology, has said that there are currently over 100,000 startups in the country and that the number is expected to increase by more than tenfold. He has also predicted that the current 108 unicorn startups will increase to 10,000 in 4-5 years.
As such, India's startup ecosystem is expanding significantly, especially among the younger generation. What is encouraging is the high rate of unicorn startups compared to the number of startups. While it's hard to compare apples to apples, there are 108 unicorns out of every 100,000 startups in India. In comparison, South Korea has 6.7 times the number of startups (67.5K) but only 22 unicorns.
The reasons for this high rate of unicorn firms in India are likely due to the enabling environment that has allowed the digital industry to flourish: 1) a domestic market with a large population, 2) relatively low labor costs, 3) low communication costs, and 4) the use of English to facilitate globalization.
Currently, India’s web3 startups are on the same growth trajectory. In 2022, web3 startups raised over USD $1 billion in 43 funding rounds over six months, which is more than double the growth from last year. In 2023, there are more than 450 web3 startups operating in India, with an estimated USD $1.3 billion in funding (some say over 900). While the scale of investment has been somewhat muted, the web3 industry continues to grow. This indicates there is a lot more room for growth beyond Polygon, which is already on track.
Softening government stance: from outright bans to unlocking technology potential
As recently as 2021, India was considering an outright ban on all crypto assets, but in recent years, the country has shifted its stance toward recognizing the potential of technology to foster innovation for the purpose of protecting consumers. Notably, at the G20 summit in 2023, the Indian president emphasized the need for global regulation of crypto assets, underscoring the country's progressive stance on the issue. A concrete framework based on those remarks is expected soon, ensuring that consumers will be protected within the regulations.
The government has also been demonstrating the potential of the technology in practical ways. First, there was the introduction of the CBDC electronic rupee, the pilot program of which was launched in December 2022 in four major cities to help reduce cash dependency and facilitate government oversight. The NITI Aayog, India's premier public policy think tank, is also piloting blockchain technology programs, and the Ministry of Electronics and Information Technology has established a Blockchain Technology Center of Excellence to strengthen collaboration between the public and private sectors.
However, as is the case in every country, not all government agencies are going in the same direction. When it comes to cryptocurrency taxation, India has gone a bit overboard. The government has classified cryptocurrencies as virtual digital assets (VDAs) and imposed a 30% tax on crypto income, which could somewhat stifle the growth of the market.
Bengaluru: The base in an emerging country
As mentioned above, the Indian market is often cited as a base for expansion in emerging countries. OKX recently entered the Indian market, and Ava Labs is also hiring employees from OKX and Polygon to expand in India. India is a country with a large English-speaking population, and it is believed that the company is strategizing to expand its Web3 business within the Indian market and later expand to Southeast Asia.
One city in particular that is gaining traction in India is Bengaluru, home to the inaugural India Blockchain Week (IBW) organized by Hashed Emergent. Bengaluru is often referred to as the Silicon Valley of India, home to global IT companies such as Intel, Oracle, and Cisco, and many web3 companies are also located in the city. Currently, Web3Jobs shows 1,071 web3 job listings in India, with 31% of them in Bengaluru.
India is emerging as a key player in the growth and development of the web3 market. With a young demographic, large population size, and high development capabilities, India has the fundamentals for rapid adoption and proliferation of web3 technologies. In addition, a thriving startup ecosystem and a shift in the government's strategic stance are further accelerating India's digital transformation. This growth is driving interest in India as a base for Southeast Asian countries, as evidenced by a number of announcements from Chainalysis and others.
However, India's regulatory framework is also uneven, and the country's regional imbalance means that digital industries can only thrive in centralized hubs. We also found that there is still a lack of understanding of web3 technology and the industry, based on interviews with some of the local public. However, these limitations are common across the globe, and we believe that the market has a lot of potential, so it is worth keeping an eye on India’s next steps.
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