The drivers for the adoption of cryptocurrencies like Bitcoin BTC/USD, Dogecoin DOGE/USD, and Ethereum ETH/USD in India and Vietnam — two countries among those with the highest grassroots adoption — are significantly different, as per a report from Chainanalysis.
What Happened: Both India and Vietnam are parts of the Central & South Asia & Oceania (CSAO) market, which is the fourth largest studied by Chainanalysis.
In terms of value received between July 2020 and June 2021, CSAO makes up for 14% of global transaction value in the time frame at $572.5 billion.
India saw a significantly larger share of activity taking place on Decentralized Finance, or DeFi, platforms at 59% compared with 47% for Vietnam, as per the report.
ETH and wETH make up for a larger share of Indian activity than in Vietnam.
“This isn’t surprising, as Ethereum and wETH more commonly used for DeFi transactions,” noted Chainanalysis.
The Indian cryptocurrency market is also characterized by the presence of large institutional investors with more than $10 million transfers, which account for 42% of transactions sent from domestic addresses.
In contrast, Vietnam’s large institutional investors account for 29% of transactions sent.
The stigma of being associated with cryptocurrencies in India has been ebbing, as per the report.
“There used to be a certain amount of stigma. In 2014, if you were at a VC event and said you were in crypto, you might have someone coming up to you later in the evening asking if you could get them drugs online,” said Joel John, a principal at India-based cryptocurrency investment firm LedgerPrime, as per Chainanalysis. “Now, crypto has become the cool place to be.”
Why It Matters: The Indian cryptocurrency market is larger and more mature than the one in Vietnam, the report pointed out.
On what’s moving Vietnam’s retail-driven cryptocurrency market, Binh Nguyen, the Coordinator of the RMIT Fintech-Crypto Hub and Senior Program Manager of Finance at the Royal Melbourne Institute of Technology- Vietnam (RMIT), said, “Most forms of gambling are illegal but quite popular in Vietnam, and I think that’s one reason people here are willing to invest in high volatility assets like cryptocurrency.”
“Low financial literacy is a driver of excessive risk-taking and may create lucky financial rewards for crypto-investors during a bull market. Lots of sophisticated investors may be waiting five to ten years and missing out.”
On the other hand, India’s back office and outsourcing workers are influencing cryptocurrency markets as well.
“Tons of Indian developers, fund analysts, and independent freelancers working for overseas employers have started requesting to be paid in cryptocurrency. It’s a very bottom up way of adopting,” said Krishna Sriram, Managing Director at Quantstamp, as per the report.
Both countries face challenges when it comes to investors finding their ways to traditional financial markets.
“Young people here don’t have many options for investing. We don’t have a well-developed financial market for ETFs, options, or futures and the stock brokerage penetration rate is lower than 5% in Vietnam,” said Nguyen.
“Investing in equities in India is a long, painful process that requires you to sign lots of documents. It takes about three to four days. Investing in crypto takes less than an hour,” said John.
He estimates there are 4x as many cryptocurrency investors in India as there are equity investors.
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