Web3 devs, gamers, investors thrive despite India’s crypto policy hurdles

India is witnessing a significant surge in its contribution to the global Web3 ecosystem, marking substantial year-on-year growth across software development, gaming, investments, and startup funding, even amid the absence of tailor-made local cryptocurrency regulations. According to the India Web3 Landscape Report 2024 by Hashed Emergent, India’s share of global Web3 developers has leaped from 5% to 12% over the past decade, positioning it as the second-largest developer market after the United States.

### Factors Driving Adoption

Tak Lee, CEO and Managing Partner at Hashed Emergent, identified several key factors propelling India to the forefront of global crypto adoption. These include a robust presence of retail crypto transactions on centralized services, the highest trading volumes observed in the market, a rise in institutional adoption, and active participation in retail decentralized finance (DeFi) transactions.

### Dominance of Gen Z Developers

The burgeoning developer landscape is predominantly shaped by the younger demographic, with around 80% of blockchain developers in India aged between 18 and 27. Within this cohort, preferences are notably gravitating towards platforms like Solana for projects in DeFi, Payments, AI, and SocialFi. Additionally, emerging platforms like Ton, Aptos, and Base are gaining traction across various sectors, attributed to the expanding layer-1 and layer-2 ecosystem presence.

### Funding Opportunities and Challenges

While the increase in funding opportunities—including hackathons—supports initial growth, developers express concerns over the reluctance of employers to provide competitive salaries that align with global industry standards. The Web3 gaming sector faces its own hurdles, namely the elevated customer acquisition costs required to transition Web3 users, coupled with the challenge of delivering quality gameplay that can attract and retain players from the traditional gaming world. As a result, several developers are prioritizing high-quality game experiences before incorporating blockchain functionalities or tapping into the Indian market’s enthusiasm for real-money gaming (RMG).

Investment in the Indian Web3 landscape experienced a striking 224% increase in 2024 compared to the previous year, fueled by local funds, ecosystem funds, and venture arms associated with leading exchanges. However, Lee notes that the scarcity of growth capital and the absence of traditional funding avenues push entrepreneurs to explore crowd sales as potential funding solutions. He emphasizes, “Some renowned projects may also explore crowd sales due to higher valuations offered, but this is extremely rare and typically executed by blue-chip founders who can confidently raise significant amounts from retail.”

### Market Dynamics and Regulatory Hurdles

Despite facing a challenging high-tax environment for cryptocurrency, the appetite for small-scale crypto investments is on the rise within India. Many traders are choosing to execute small, frequent trades, with 96% maintaining positions of less than $12 while leveraging, on average, 11x-20x. Interestingly, female traders constitute 1 in 10 futures traders in the country, indicating an opportunity for increased female participation in the sector.

Amid these dynamics, calls for reform in crypto tax deductions and regulatory clarity are intensifying. There is an urgent need for comprehensive federal guidance on tax implications specific to cryptocurrency activities. “India must overcome its negative policy perception that stifles innovation and focus on addressing the pain points faced by stakeholders through effective regulation,” the report states.

### A Path Forward

The wish list for Indian Web3 encompasses the establishment of a regulatory framework for virtual asset service providers (VASP), tax rationalizations, improved banking and payment access for Web3 companies, exemptions from existing VASP regulations, and clearer guidelines on current regulatory frameworks. Recent regulatory measures, such as the URL blocking of unlicensed local crypto exchanges, have resulted in an increased shift towards self-custodial solutions and domestic exchanges that comply with Indian regulations.

As the landscape evolves, the call for progressive regulation is echoed among stakeholders eager to navigate the complexities of the Web3 era while fostering innovation and growth within India’s thriving digital economy.