India, China's regulation of crypto "weakly correlated" with participation
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Shoshana Gordon/Axios
India and China discourage their citizens from participating in cryptocurrency, yet they see strong adoption nevertheless.
Why it matters: The two countries are cases for updated research on regulation around the world that shows people are going to find a way to buy cryptocurrency.
The Atlantic Council, which is tracking crypto regulation in 60 nations, assessed their impacts using data from Chainalysis, the leading crypto tracking company.
- It found that whole or partial bans are "weakly correlated" with reducing participation.
By the numbers: 33 nations legalized holding cryptocurrency and 27 generally or partially banned it.
- The world's two most populous nations have strong crypto sectors despite governments that have discouraged the industry.
China
China began its crackdown in 2017. Beijing has restricted certain activities, such as financial firms facilitating payments in cryptocurrency or using blockchains to raise money for startups.
- Owning cryptocurrency has not been outright prohibited.
- Chainalysis estimated $86.4 billion in peer-to-peer transactions in China over 12 months through June 2023.
- China also has one of the largest numbers of people who own cryptocurrency in the world.
The intrigue: Some of the most important businesses in the sector are rooted in China.
- Perhaps most crucially, Beijing-based Bitmain is far and away the market leader in manufacturing Bitcoin mining equipment. What Nvidia is to AI, Bitmain is to Bitcoin.
- Three of the biggest cryptocurrency exchanges in the world, Binance, HTX (formerly Huobi) and OKX, started in China.
India
In 2018, India's banking authority banned banks from supporting cryptocurrency trading and investing, though it was reversed by the court in 2020, as more citizens piled into the market.
- The nation then opted for severe taxes on traders: 30% on all profits from any trade and a 1% transaction tax on most of them.
- Then at the end of 2023, regulators kicked multiple exchanges out of the country, following Coinbase's exit amid the terra stablecoin fallout.
- Nevertheless, Chainalysis ranked India highest in grassroots adoption last year.
Friction point: While India lacks major crypto firms with global reach like China, it may have the largest addressable market, despite its government's ambivalence.
- The latest: The steep taxes stand, with the domestic industry now focusing on pushing changes in the 2024-25 fiscal year.
Reality check: "Bringing crypto-activity within [a] regulatory perimeter and making it realistically enforceable (clear authorities, laws, and enforcement capacity) is necessary for the safe development of domestic crypto markets," Ananya Kumar, deputy director of the Atlantic Council's Future of Money team, tells Axios.
