India slipped two places to fourth in crypto adoption rate on crypto tax and uncertainty around its legal and regulatory status, a report ‘The 2022 Global Crypto Adoption Index Top 20’ by the US-based crypto analysis platform Chainalysis shows. In 2021, India was ranked 2nd in Chainalysis’ crypto adoption index, and 4th during the year before that.

The list, which comprises 20 countries with the highest cryptocurrency adoption rate, ranks Vietnam in the first place, followed by the Philippines and Ukraine in the second and third spots. Vietnam has topped the chart for the second consecutive year.

"Vietnam shows extremely high purchasing power and population-adjusted adoption across centralised, DeFi, and P2P cryptocurrency tools," says the report.

Polling done in 2020 found that 21% of Vietnamese consumers reported using or owning cryptocurrency, second only to Nigeria at 32%, which is expected to grow since then.

Other countries in the top 10 are Pakistan (6), Brazil (7), Thailand (8), Russia (9) and China (10). Despite a ban on crypto, the neighbouring country China remains active. Overall, emerging markets lead in grassroots adoption, and the fundamentals around crypto appear healthy, says the report.

The United States moved up to fifth in the crypto index rankings from eighth in 2021 and sixth in 2020. China re-entered the top 10 of the index this year after placing 13th in 2021. This is interesting given the Chinese government’s crackdown on crypto activity, which includes a ban on all crypto trading announced in September 2021. "The ban has either been ineffective or loosely enforced," shows the report.

One trend that has dominated the industry is that emerging markets are dominating the index.

In the list of top 20 countries, with the highest crypto adoption, 10 are lower-middle income nations -- Vietnam, Philippines, Ukraine, India, Pakistan, Nigeria, Morocco, Nepal, Kenya, and Indonesia. Eight are upper-middle income nations -- Brazil, Thailand, Russia, China, Turkey, Argentina, Colombia, and Ecuador, while only two are high-income countries i.e. the US and the UK.

The reason for the high adoption of crypto assets in lower and middle-income nations is because they rely on crypto to send remittances, and preserve their savings in times of fiat currency volatility.

"Over the coming years, it’ll be interesting to see what solutions the cryptocurrency industry can build to increase adoption in high and low-income countries," the report shows.

The data shows that global adoption has levelled off in the last year after growing consistently since mid-2019.

Global crypto adoption reached its current all-time high in Q2 2021. Since then, adoption has moved in waves – it fell in Q3 2021, which saw crypto price declines, and rebounded in Q4 2021.

In the two quarters of 2022, crypto adoption has fallen consistently as the world entered a bear market. "Still, it’s important to note that global adoption remains well above its pre-bull market 2019 levels," says the report.

Many of those attracted by rising crypto prices in 2020 and 2021 stuck around, and continue to invest a significant chunk of assets in digital assets.

Notably, the major difference in Indians’ use of crypto came after exchanges observed a drop in trading volumes after July this year as the government imposed a 1% TDS on the sale of crypto assets. Since then, many professional crypto investors have also shifted crypto trading to exchanges abroad. The situation is unlikely to improve till the government does not come up with a clear policy in crypto, say experts.

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