Author: Tiger Research

Compiled by: Felix, PANews

TL;DR

• Key development region for Web3 projects: India, with a population of 1.4 billion (median age 28), 9.75 million developers, over 1,200 projects, and $3 billion in investment, provides optimal conditions for the scale needed for Web3 ecosystem development.
• Regulatory uncertainty is a major obstacle: including a fixed tax rate of 30%, a 1% withholding tax, lack of dedicated regulatory bodies, and complex jurisdictional issues.
• Develop strategies for different stages: Successfully entering the market requires guiding Web3-friendly users (local language support, regional marketing), then identifying builders (collaborating with local investors), and finally expanding to partnerships with governments and enterprises.

1. Why Understanding the Indian Market is Necessary

The Web3 market is continuously emerging with new projects, which prioritize "data." Data ultimately represents the users, builders, and investors participating in the ecosystem, and many projects are striving to create this data. Among the numerous new projects, verifiable data is particularly important for attracting attention. Asia, especially India, is a central region capable of generating real and meaningful data.

India's first advantage is its young population. The median age in India is about 28 years, younger than Indonesia (30 years) or Vietnam (32 years). This demographic shows a rapid acceptance and enthusiastic attitude towards new technologies. The second advantage is the large population size. India has over 1.4 billion people, with only about 8% currently holding cryptocurrency, providing immense potential for the expansion of Web3 technology. The third advantage is development capability. India has many excellent engineering universities and approximately 9.75 million developers, who have demonstrated outstanding development capabilities through successful Web3 projects like Polygon.

India is the most suitable region for generating the key "data" needed today, and many projects have entered India and achieved results. However, like all regions, India also has disadvantages. The India-based Web3 venture capital firm Hashed Emergent has compiled a market report providing a "white paper" for entering the Indian market.

2. Key Summary of the Hashed Emergent Report

2.1. Web3 Ecosystem

India has established a broad Web3 ecosystem, with over 1,200 projects operating across various fields. To date, Indian Web3 startups have attracted over $3 billion in total investment, with particularly strong growth in 2024, securing $564 million in investment, more than double that of 2023.

By investment sector, infrastructure is the most attractive, followed by finance. In contrast, investment in the entertainment industry has significantly declined. In the popular infrastructure sector, Indian founders who have established a foothold overseas have made significant contributions. They have developed globally competitive services such as Eigen Layer, Sentient, and Avail, attracting substantial investment funds.

Recently, emerging fields such as DePIN and BaaS (Blockchain as a Service) have also caught the attention of investors. These trends indicate that investors are actively exploring the possibilities of applying decentralized technology across various industries.

Particularly in industries applicable to the AI era, AI-based infrastructure, middleware, and data tools are becoming key investment areas. In the local market, major venture capital firms, including Hashed Emergent and Polygon, are actively involved in nurturing and investing in India's Web3 ecosystem.

2.2. Consumer and Enterprise Adoption

Since 2023, the Indian crypto investment market has shown a clear trend of recovery. It ranks first in Chainalysis's cryptocurrency adoption index, scoring high in both CEX and DEX sectors.

Retail investors have 45% of their portfolios in reliable blue-chip cryptocurrencies. Notably, meme coins have seen a fivefold increase in trading volume compared to other crypto assets. This indicates a shift in retail investors' investment preferences.

By age, individuals aged 27-40 dominate token investments due to higher income and market awareness. Notably, investors in their 40s have an average investment amount three times that of other age groups. Generation Z accounts for 35% of all crypto investors, playing a significant role in market expansion.

India's Web3 gaming market is developing by ensuring a user base centered around Generation Z. Notably, 50% of gamers are under 25, indicating that young demographics can quickly adapt to new gaming models. The average revenue per user (ARPU) in Web3 gaming reaches $220, significantly higher than the $120 in Web2 gaming.

In Web3 gaming, the proportion of paying users is 64%, with high-spending users making up 11%, outperforming the revenue structure of Web2 gaming (56% and 8%, respectively). Additionally, 38% of traditional gamers have experienced Web3 gaming, with 60% of those players choosing to continue participating.

The government has taken proactive measures to create a national blockchain framework. This framework aims to enhance the security and transparency of citizens' use of services. Key components include the "Vishvasya" blockchain-as-a-service platform, the "NBFLite" sandbox for rapid research by startups and universities, "Praamaanik" for verifying the authenticity of mobile applications, and a national blockchain portal. Additionally, the CBDC pilot project led by the Reserve Bank of India (RBI) has gathered 5 million users from 16 banks to test new payment methods using blockchain technology.

2.3. Developer Ecosystem

India has become a global hub for entrepreneurs and developers, leading innovation across various Web3 fields. It has become the largest developer market, accounting for 12% of the global cryptocurrency developer community.

According to a survey of over 500 developers, India's Web3 ecosystem is rapidly developing due to its young talent, entrepreneurial vigor, and expanding global exposure. An ecosystem supporting its growth has formed through university partnerships and flexible work models.

Despite the increasing global exposure of developers, 51% still report that their salaries do not meet global standards.

Hackathons and developer communities have become key elements in the development of India's Web3 ecosystem. These platforms provide developers with practical experience, mentorship, funding opportunities, and global exposure. As participation increases, the growth trajectory of the next generation of developers is taking shape.

2.4. Regulation, Taxation, and Policy

India's Web3 industry is currently in a transitional phase of rapidly changing regulatory and tax policies. Strong regulatory measures and high tax rates from the government have limited market development, necessitating urgent policy adjustments to support industry growth.

Starting in 2023, the Indian government has comprehensively strengthened anti-money laundering regulations to enhance transparency in the virtual asset market. All virtual asset service providers (VASP) must register under anti-money laundering laws and implement customer identification procedures, maintain transaction records, and designate dedicated anti-money laundering officers.

By the end of 2024, regulatory tightening is expected to become more pronounced. The Indian government has taken extreme measures to completely block access to foreign crypto exchanges that do not comply with local regulations. This action clearly indicates that compliance is a prerequisite for entering the Indian market.

Tax policies have also undergone revolutionary changes. The 2025 Finance Bill establishes a mandatory reporting system for cryptocurrency transactions and user information by adopting the OECD's international standards for crypto asset reporting framework. Additionally, the legal definition of virtual digital assets is expected to expand to a more comprehensive concept of "crypto assets."

The current tax structure imposes a heavy burden on the industry. Crypto investment profits are subject to a high fixed tax rate of 30%, with no cost deductions, and all individual transactions incur a 1% withholding tax. This tax burden severely restricts market liquidity.

The lack of a dedicated Web3 regulatory body presents another issue. Regulatory ambiguity regarding the classification of virtual assets and the handling of decentralized protocols persists due to overlapping jurisdiction among multiple agencies. Web3 companies face difficulties accessing basic financial infrastructure, from opening bank accounts to using payment services, with many exchanges restricting cryptocurrency withdrawals, hindering users' self-custody options.

For India's Web3 industry to achieve sustainable development, there is an urgent need for a regulatory framework tailored to Web3, reducing tax burdens, improving accessibility to financial services, and reasonably regulating non-custodial services such as asset self-custody.

3. India is on the Verge of a Breakthrough

Overall, India has formed a mature ecosystem with a developed industry and user base, but the core issue lies in the government's regulatory chaos. While the aforementioned macro factors are generally favorable, a mature regulatory framework necessary for regional ecosystem development has yet to be established. Although government-led blockchain initiatives have achieved positive results, the lack of a dedicated regulatory body and overlapping jurisdictions creates uncertainty from an external perspective.

In the ever-changing global regulatory environment, this chaos significantly diminishes market attractiveness. This is the biggest obstacle for investors and enterprises entering the market, requiring swift resolution.

Entering the Indian market requires a phased strategy. First, priority should be given to users with high Web3 adaptability. Indian users have a deep understanding of Web3 and are numerous, so effective results can be generated through successful user guidance. This requires support for local languages and hiring local personnel or collaborating with marketing agencies to understand local marketing and business structures.

Second, development can be targeted at builders. At this stage, direct contact with investors such as Hashed Emergent becomes crucial. Relying solely on local institutions has limitations in supporting builders and lacks sufficient expertise.

Finally, expansion can occur through partnerships with governments and enterprises. Although the government has caused some chaos, it has established a national blockchain framework and achieved tangible results. Strategic cooperation can ensure a leading position in driving market transformation.

Related Reading: Korea's Crypto Exodus: Outflow of Capital, Enterprises, and Talent

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