India has become the second largest crypto market in the world in terms of raw transaction volume, beating out the UK, Turkey and Russia. And that's despite difficulties around tax laws, according to a new report from Chainalysis. 

"India leads the world in grassroots adoption as measured by our Global Crypto Adoption Index," it wrote, saying volumes totaled nearly $269 billion from July 2022 to June 2023. "Perhaps most impressive of all is that India’s emergence as a top cryptocurrency market comes in spite of a regulatory and tax environment that can be challenging for the industry to navigate."

Chainalysis noted that India currently taxes crypto at higher rates than most countries, with a 30% cut taken on gains and a 1% tax on all transactions. It said that uneven application of the transaction tax may be making it harder for homegrown exchanges to compete. 

Estimated raw transaction volume by country. Image: Chainalysis

'Enormous demand'

"While those issues are important, they don’t appear to have dampened India’s enormous demand for cryptocurrency — as long as that demand is there, crypto will always have a place in the world’s second-largest country," Chainalysis wrote.

The U.S. is the world's largest crypto market by far, according to the report.

On a regional basis, Central & Southern Asia and Oceania account for 20% of the world's cryptocurrency market, according to Chainalysis. It said the region was possibly "the world’s most dynamic and fascinating cryptocurrency market."

Chainalysis highlighted recent adoption in the Philippines as being driven by the play-to-earn game Axie Infinity. In Pakistan, meanwhile, necessity is driving growth.

"A need for wealth preservation in the face of high inflation and currency devaluation appears to be the reason many Pakistanis have turned to crypto," it wrote.