Cryptocurrency Exchanges Large-Scale Adoption of Digital Currency in India, the Philippines, and Pakistan

Central Asia, South Asia, and Oceania (cryptocurrency exchanges) host the world’s most vibrant and attractive cryptocurrency markets. Based on raw trading volume, Central Asia and Oceania are the third-largest cryptocurrency markets in our study, behind North America and Central, Northern, and Western Europe (CNWE), accounting for less than 20% of global trading volume.

India leads significantly in trading volume, receiving approximately $268.9 billion in crypto assets during the study period.

However, raw trading volume doesn’t tell the whole story. When we consider purchasing power and population to gauge grassroots adoption, cryptocurrency exchanges dominate. This is reflected in the Global Crypto Adoption Index, where six of the top ten countries are in this region: India (1), Vietnam (3), Philippines (6), Indonesia (7), Pakistan (8), and Thailand (10). Additionally, DeFi played a more significant role in cryptocurrency exchanges last year, accounting for an estimated 55.8% of regional trading volume from July 2022 to June 2023, up from 35.2% in the previous year. Institutional adoption in the region also appears to be rising, with 68.8% of total transactions involving transfers of $1 million or more, compared to 57.6% previously.

But importantly, in terms of cryptocurrency adoption, cryptocurrency exchanges are not monolithic. Factors driving crypto adoption vary across different countries, leading to different usage patterns of various crypto services. This is illustrated in the following chart, which shows the network traffic details of different types of crypto platforms in countries with the highest adoption indices.

In all these countries, centralized exchanges account for the majority of network traffic, which is also true globally. However, significant differences are observed elsewhere. For example, in the Philippines, a large portion of crypto-related network traffic (19.9%) is directed toward gaming and gambling platforms, while in Vietnam, it’s only 10.8%. Meanwhile, countries like Pakistan and Vietnam have higher shares of P2P exchange activity, which are more commonly used in emerging markets or countries with stricter capital controls.

Next, we will explore the different drivers of application in the Philippines and Pakistan, and how these differences lead to distinct usage patterns. Then, we will look at some recent trends in India, which is a global leader in grassroots crypto adoption.

The craze for Axie Infinity marked the beginning of crypto adoption in the Philippines, but what happens next?

For a long time, crypto enthusiasts have viewed the $217 billion video game industry as a sector where cryptocurrencies can have a positive impact—allowing players to earn, buy, and sell in-game items. We’ve seen some ambitious projects start to address this, with varying degrees of success. No country has embraced these projects more than the Philippines, especially the play-to-earn game Axie Infinity, which captured the country’s attention. To learn more, we interviewed Donald Lim, a veteran in the Philippine advertising and marketing industry, involved in multiple sectors, who has now entered the crypto space as the first chairman of the Philippine Blockchain Council and a key organizer of Philippine Blockchain Week.

“Lim said: ‘I believe Axie Infinity was the moment crypto truly landed in the Philippines. While the game is most popular among the younger generation, I see people from all walks of life playing it.’ You get on a tricycle and see the driver with a phone on the windshield, playing Axie—there are many stories like this. In fact, the Philippines accounts for the largest share of Axie Infinity’s network traffic, reaching 28.3%. On-chain data shows that the country’s crypto trading volume growth coincided with Axie’s surge in summer 2021.

What makes the Philippines so receptive to “play-to-earn” games like Axie Infinity? Lim cites several reasons. First, the Philippines has a young, tech-savvy population that has already adopted digital wallets like GCash. When Axie launched and gained popularity, the world was in the midst of the COVID pandemic, with many people stuck at home and unemployed—Axie provided entertainment and a way to earn extra cash. It also offered a social channel. “Filipinos are used to working hard to connect online and via social media because, as a country made up of many islands, we are inherently isolated from the outside world. We are also the world’s largest remittance senders, and Filipinos abroad want to stay connected with their families,” Lim explained. According to him, high social media usage in the Philippines makes it easier for the game to go viral through influencer marketing and other strategies, reaching users effectively.

Subsequently, overall usage of Axie Infinity and token prices declined sharply, and many Filipinos and others who abandoned the game are not much better off economically. But the game’s success laid the groundwork for further crypto adoption, as many Filipinos who played now have wallets with funds that can be used for other purposes.

Lim believes that the best way to turn initial momentum into beneficial crypto applications is for regulators and large online companies to step up. “Crypto adoption can’t just be bottom-up. Governments need to set rules, and major companies need to incorporate crypto into their products.” Both aspects are seeing positive developments. The Philippine government has designated an economic zone in Bataan where crypto companies can operate with tax incentives and within a regulatory sandbox aimed at fostering innovation. On the private sector side, Philippine airline Cebu Pacific recently launched a utility-driven NFT series offering special privileges, and financial services firm Cebuana Lhuillier announced integration with the Stellar blockchain to provide faster, cheaper remittances—crucial for a country like the Philippines that receives large amounts of foreign funds.

Lim is confident that the Philippines has the potential to become a leader in crypto. “We can be Asia’s blockchain capital. Look at the developer talent, look at all the online groups dedicated to trading and NFTs—it’s only a matter of time.”

In Pakistan, demand has driven the adoption of cryptocurrencies, especially stablecoins. Although Pakistan’s overall trading volume is low, its grassroots adoption rate is among the highest in the world, comparable to the Philippines. But the adoption patterns differ greatly. Social relationships and speculative behavior drive many Filipinos into crypto through “play-to-earn” games, while in Pakistan, the need for wealth preservation amid high inflation and currency devaluation appears to be the main driver. We interviewed Zeeshan Ahmed, Pakistan country manager for the prominent crypto exchange Rain, to learn more. Rain operates in several countries in the region, but due to current Pakistani laws prohibiting crypto trading, it has no active business there yet. However, it is working toward regulatory approval.

When asked what is driving crypto adoption in Pakistan, Ahmed provided some insightful data. “Five years ago, Pakistan’s inflation rate was 10.6%. Now, the official reported inflation is 29.4%, but it’s actually much higher. The main spike occurred over the past 16 months, with the rupee falling from 178 PKR per USD in January 2022 to 320 PKR in August.” Unfortunately, Pakistan’s severe economic situation means savings are quickly eroded. Besides, in the current environment, there are few good options for ordinary people to invest. “The stock market and securities exchanges are in decline. Any gains can be wiped out by inflation. Pakistani citizens are also prohibited from holding physical foreign currency—foreign currency must be deposited in banks. For many, this makes crypto, especially stablecoins, a necessity,” Ahmed explained. “It’s our only hedge.”

Equally important, on-chain data does not fully capture crypto adoption in countries like Pakistan. Most transactions, especially for stablecoins, occur through informal P2P markets that are hard to track on-chain. Therefore, it’s difficult to know exactly how many people hold or acquire crypto at any given time. Experts also speculate that Pakistani businesses use stablecoins like USDT to import goods from abroad, hedge against inflation, and currency devaluation, but this is hard to verify.

Although Pakistan officially bans crypto trading, Ahmed believes a clear regulatory framework would help make the crypto market more effective for Pakistani citizens. “While the official stance hasn’t changed, I feel some progress has been made recently.” “Eight months ago, our regulators didn’t even want to discuss crypto. But in July this year, we submitted a white paper on how to regulate crypto, and they seem to be moving forward.” For example, future regulations might allow Pakistanis to transfer funds from bank accounts to exchanges more easily, making it cheaper and simpler to access digital assets and paving the way for further growth.

Despite legal hurdles, India remains a top crypto market

While other markets in the region are vibrant and help us understand the unique drivers of crypto adoption, the largest crypto market so far is India. According to our “Global Crypto Adoption Index,” India ranks first in grassroots adoption, but even more impressive is that, based on raw estimated trading volume, India has become the second-largest crypto market in the world, surpassing several wealthier countries.

India’s crypto usage spans various activities, with top ten rankings across different categories of crypto services.

Perhaps most notably, despite a challenging regulatory and tax environment, India has become a top crypto market. Last year, regulators issued clearer guidelines on several issues, such as formally stating that their anti-money laundering rules apply to crypto trading. However, India’s taxes on crypto activities are among the highest globally—30% on gains, and a 1% withholding tax (TDS) on all transactions, meaning crypto platforms must deduct this amount from user balances at the time of trading.

Recent reports confirm that industry insiders say the uneven implementation of TDS could increase the difficulty for domestic exchanges to compete. While all exchanges operating in India must collect TDS from Indian users, many international exchanges do not do so effectively, potentially attracting Indian users away from domestic platforms. Evidence from the chart below shows that network traffic from India to international exchanges surged immediately after TDS was implemented in July 2022.

This trend underscores the importance of strict enforcement of local rules like TDS for all exchanges operating in specific countries. Otherwise, regulatory arbitrage environments could harm the growth of the domestic crypto industry.

Nevertheless, despite these issues, the enormous demand for crypto in India seems unaffected—where there is demand, crypto will find a place in the world’s second-largest economy.

Cryptocurrency exchanges demonstrate that crypto can adapt to local conditions

No region makes a stronger case for the future of crypto than cryptocurrency exchanges, not only because many countries in this region are leaders in grassroots crypto applications. It’s also because these countries have broad and unique economic needs, and different crypto platforms and assets have emerged precisely to meet those needs. In the Philippines, many people want to speculate on new assets, earn extra cash, and build digital connections—play-to-earn games have become a foothold into the broader digital asset economy. Thousands of Filipinos now hold crypto wallets for other purposes. In Pakistan, the economic situation is more severe—considering Pakistan’s per capita PPP of $5,680 and the Philippines’ $9,210, plus the currency devaluation we described, stablecoins are providing economic relief. If the Pakistani government enacts reasonable crypto regulations, existing users could form the foundation for a thriving crypto market, as seen in India. Cryptocurrency exchanges show that regardless of a country’s circumstances, crypto can play a valuable role. **$LTC **$TRX **$LRC **