Author: Tiger Research Reports
Compiled by: TechFlow
Key Points
- India continues to lead global cryptocurrency adoption, thanks to its strong institutional participation and regulatory adjustments, although it also faces challenges such as high taxes and temporary exchange bans.
- Indonesia has leaped from 7th to 3rd place in the global cryptocurrency adoption ranking. This growth is mainly driven by increased use of decentralized exchanges, active institutional trading, and local regulations encouraging blockchain innovation.
- Southeast Asia exhibits diverse cryptocurrency use cases. Singapore leads in stablecoin adoption and merchant services, the Philippines focuses on play-to-earn gaming and remittances, while Vietnam prioritizes peer-to-peer exchanges.
1. Introduction: Shifting Dynamics of Cryptocurrency Adoption
Southeast Asia and India have emerged as global leaders in cryptocurrency adoption. The region has become a hub of blockchain activity, driven by grassroots user engagement, growth in professional trading, and increased institutional interest. As decentralized finance (DeFi) and centralized exchanges (CEXs) expand globally, Southeast Asia not only keeps pace but often leads the forefront of cryptocurrency development.
Chainalysis' Global Crypto Adoption Index highlights the significant impact of this region on the Web3 industry. Malaysia and Singapore still lag behind other Southeast Asian countries in cryptocurrency adoption, while Cambodia has made a remarkable leap to 13th place. Indonesia currently ranks 3rd, showcasing its rapid growth in cryptocurrency adoption, while Vietnam, the Philippines, and Thailand have seen slight declines in their rankings.
2. Key Changes from 2023 to 2024
Chainalysis calculates this index based on four core factors: 1) Rank of received centralized service value, 2) Rank of received retail centralized service value, 3) Rank of received DeFi value, and 4) Rank of received retail DeFi value.
This report delves into the analysis of these four factors in the Global Crypto Adoption Index and provides insights into the changes in the cryptocurrency markets of Southeast Asia and India. The report compares the key changes from 2023 to 2024 and discusses the potential drivers behind these shifts in the adoption index.
2.1 India: Crypto Heavyweight
India has maintained its top position in the global cryptocurrency adoption index in 2023 and 2024, further solidifying its leadership in the crypto space. While India's centralized service metrics have remained stable, its DeFi metrics have seen a slight decline due to increased activity in other countries. Notably, Indonesia and Nigeria have experienced rapid cryptocurrency adoption, with Nigeria completing over $30 billion in DeFi transactions last year.
The changes in the centralized service metrics have had a limited overall impact. For example, in December 2023, India's Financial Intelligence Unit issued notices to nine offshore exchanges, including Binance, about impending regulatory action. Subsequently, the Ministry of Electronics and Information Technology (MeitY) began implementing URL blocks to restrict Indian users' access.
However, a report by the Esya Centre indicates that the impact of these blocks is temporary, as users continue to access exchanges through pre-downloaded apps, with some apps still downloadable even after the government bans.
The tax policy remains unchanged, with a 30% capital gains tax on cryptocurrencies and a 1% TDS (Tax Deducted at Source) on all transactions, but trading activity remains robust. By 2025, India's position in the blockchain space is expected to further strengthen with the launch of the National Blockchain Framework (NBF) by MeitY in 2024. This government-backed initiative leverages permissioned blockchain technology to enhance the security, transparency, and trust in public services.
The current support is primarily focused on structural applications rather than investment incentives, as the tax policy is expected to remain unchanged. As a result, India's crypto market participants are calling for tax cuts in the 2024-25 budget to create a more favorable investment environment. However, the impact of these measures on the cryptocurrency adoption index, particularly the investment factor, remains uncertain.
2.2 Indonesia: Surge in Crypto Engagement
Indonesia has made significant progress in the global cryptocurrency adoption index, jumping from 7th place in 2023 to 3rd place in 2024, with notable improvements in both centralized service and DeFi rankings. The continued growth in centralized services this year is likely to further boost its ranking in the coming year.
According to Chainalysis data, Indonesia has shown rapid growth compared to other Southeast Asian countries. In 2023, Indonesia achieved a 207.5% increase. This growth is primarily driven by centralized exchanges like Indodax and Tokocrypto, thanks to stricter listing rules in traditional stock exchanges, leading users to shift their trading preferences towards alternative options like cryptocurrencies.
Analyzing the transaction sizes on local exchanges, we find that over a third (43.0%) of the transaction volume is between $10,000 and $1 million. Additionally, Indonesia exceeds any other country in the proportion of transfers between $1,000 and $10,000. The high share of medium to large-sized transactions indicates that professional traders dominate the cryptocurrency market in Indonesia.
The rapid growth in DeFi is primarily driven by Indonesia's young and tech-savvy population. Millennials and Gen Z, in particular, are enthusiastic about experimenting with decentralized financial solutions. The active participation of this young demographic has resulted in decentralized exchanges accounting for 43.6% of the country's trading volume, reflecting a preference for financial systems that can break free from traditional banking constraints.
To further increase cryptocurrency adoption in the future, the current tax regime needs improvement. Indonesia imposes a 0.1% income tax and 0.11% VAT on all domestic cryptocurrency transactions. These relatively high tax rates have limited the growth of centralized services, leading to a shift towards the less regulated DeFi. Adjusting the taxes to more reasonable levels could significantly boost Indonesia's cryptocurrency adoption rate.
2.3 Vietnam: Sustained Growth Amid Economic Uncertainty
Vietnam's ranking in the global cryptocurrency adoption index has declined from 3rd place in 2023 to 5th place in 2024. This is primarily due to the pressure from competing regions, such as Indonesia, which have accelerated institutional adoption and established clearer regulatory frameworks. While Vietnam has seen a slight improvement in its centralized service ranking, it has stagnated in the DeFi sector, indicating a slower pace of Web3 development.
The main reasons for Vietnam's ranking decline include: 1) fierce competition from neighboring Southeast Asian countries, 2) lack of large-scale institutional participation in the Vietnamese market, and 3) slow progress in regulatory developments to support the crypto industry. Unlike Indonesia's proactive measures to promote blockchain and crypto innovation through regulation, Vietnam appears more hesitant in formulating new policies and relaxing strict regulations to foster industry growth.
Vietnam's strict policies include restrictive regulations on crypto advertising and a lack of a clear exchange licensing framework. This regulatory ambiguity has led to a flow of capital and talent to countries with more crypto-friendly environments, impacting Vietnam's ranking in the global index.
Despite these regulatory and institutional challenges, Vietnam's grassroots crypto adoption remains strong. This growth is primarily driven by people's active participation in peer-to-peer (P2P) exchanges and DeFi platforms. According to a report by Triple-A, approximately 21.2% of Vietnamese own cryptocurrencies, ranking it second globally in crypto ownership. Vietnam's DeFi usage is also high, accounting for 28.8% of transaction volume, indicating a reliance on decentralized platforms for financial transactions under strict capital controls. This grassroots engagement highlights the important role of cryptocurrencies in bridging the gap in personal and small business financial services.
While Vietnam's robust retail adoption showcases an active crypto community, the lack of supportive regulations remains a barrier to sustainable growth. If more explicit policies to attract institutional participation and promote DeFi development are not introduced, Vietnam may fall further behind in regional competition. However, with its large crypto-holding population and high DeFi engagement, Vietnam still has the potential to maintain a significant position in the crypto ecosystem if it accelerates its regulatory pace.
In response to this demand, the Ministry of Information and Communications of Vietnam and the NEAC have recently launched a national blockchain strategy to accelerate digital transformation across industries. This move positions Vietnam to become a regional leader in blockchain innovation by 2030, demonstrating a strategic commitment to long-term growth.
2.4 Philippines: Play-to-Earn and Remittances Drive Crypto Adoption
Although the Philippines has been actively engaged in cryptocurrencies, its ranking in the global crypto adoption index has declined from 6th place in 2023 to 8th place in 2024. This ranking drop is primarily due to the country's increased reliance on centralized exchanges (CEXs), which accounted for 55.2% of trading value in 2024, a slight increase from the previous year. While the Philippines has excelled in the CEX space, its progress in DeFi and institutional adoption has been relatively slow, posing a challenge to maintaining competitiveness compared to countries like Indonesia that have made advancements in institutional adoption and regulatory clarity.
The Philippines views P2E (play-to-earn) games and remittances as the primary crypto applications. In 2023, P2E games and gambling accounted for 19.9% of total web traffic, indicating the country's focus on this niche market rather than broader DeFi adoption. This focus has positioned the Philippines as a leader in P2E games and remittances, but its growth potential is limited compared to countries that have diversified their crypto ecosystems.
Furthermore, the Philippines' regulatory environment lacks comprehensive policies to support the development of DeFi and institutional crypto. Nevertheless, the Philippines' unique strengths in P2E games and remittances continue to make it an important player in Southeast Asia's crypto landscape, but there is room for improvement in regulation and institutional development.
2.5 Thailand: Stable Regulation but Declining Adoption
While Thailand's crypto market has seen a decline in its ranking from 10th place in 2023 to 16th place in 2024 in the crypto adoption index, it continues to develop. This ranking drop is primarily due to a decrease in the value of centralized services, although retail activity remains stable, reflecting a decline in institutional participation. Additionally, DeFi activity has also significantly decreased. Considering Thailand's GDP per capita PPP growth rate of only 1.4%, which is the second-highest in the region after Singapore, this ranking decline is particularly concerning.
The main reason for the ranking decline is the reduction in active crypto trading accounts following the Terra-Luna event, which has also impacted DeFi participation. Furthermore, the political ban on the pro-crypto figure Pita Limjaroenrat has raised questions about his future influence on Thailand's crypto market, which could affect the regulatory environment and public acceptance of cryptocurrencies.
It is worth noting that Chainalysis' ranking takes into account the adjustment for GDP per capita PPP. Without these adjustments, Thailand's crypto market size would appear larger than several other countries. Thailand has a solid regulatory foundation and has recently taken steps to encourage institutional participation, indicating the government's recognition of the industry. Initiatives like the digital asset sandbox program represent important progress in integrating digital assets within a structured regulatory framework.
2.6 Cambodia, Singapore, and Malaysia
As countries ranked outside the top 20 in the index, Cambodia, Singapore, and Malaysia have shown different ranking changes due to their respective strategies towards the crypto industry.
Cambodia has risen 13 positions in the 2024 global crypto adoption index, ranking 17th, primarily due to its performance in the use of centralized services. While the specific reasons are unclear, it may be related to growing local interest in cryptocurrencies and potential illicit activities. In late August 2024, Chainalysis researchers pointed out that Hun To's platform Huione not only involved crypto scams but also allegedly participated in over $49 billion in crypto black market transactions since 2021. This continued involvement in the crypto gray area may have attracted significant capital inflows to Cambodia.
Singapore has risen from 77th to 75th place in 2024, reflecting its efforts in regulatory transparency, institutional adoption, and crypto-friendly merchant services. The stablecoin XSGD exceeded $1 billion in trading volume in the second quarter of 2024, driven by platforms like dtcpay and Grab. The Monetary Authority of Singapore's (MAS) regulatory progress, including the launch of a stablecoin framework and strengthening of crypto custody rules, has enhanced Singapore's appeal as a secure, regulated crypto environment.
Malaysia, on the other hand, has dropped from 38th to 47th place, primarily due to increased competition in the Southeast Asian region. However, Malaysia remains committed to the development of Web3 and blockchain. While progress in institutional adoption and DeFi expansion has been relatively slow, Malaysia is positioning itself as a Web3 gaming hub through various initiatives. Specifically, the collaboration announced at the IOV2055 conference by MDEC, EMERGE Group, and CARV aligns with the country's digital transformation goals.
3. Conclusion: Shifting Crypto Landscape in Southeast Asia and India
Southeast Asia and India continue to lead the world in grassroots cryptocurrency adoption. Despite regulatory challenges, India remains at the forefront of innovation and institutional participation, while countries like Indonesia are rapidly catching up. The surge in DeFi activity in Indonesia and its favorable regulatory environment demonstrate the shifting power dynamics in the regional crypto landscape.
The Philippines and Vietnam remain key crypto markets, each with a distinct focus. The Philippines primarily relies on gaming and remittance applications, while Vietnam depends on P2P exchanges and decentralized trading. Singapore's transformation towards retail and merchant crypto applications further showcases the diversity of use cases in the region. In contrast, the declining rankings of Thailand and Malaysia reflect the intense market competition.
Looking ahead, the regulatory dynamics of these countries will have a profound impact on the adoption of cryptocurrencies in Southeast Asia and India. The growing institutional adoption and strong grassroots participation highlight the region's position as a global digital asset hub.
