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Chainalysis CSAO crypto report: Web3 games in Philippines; Pakistan, and Stablecoins; India at the top globally



The report of Crypto Index globally from Chainalysis highlighted that Central & Southern Asia and Oceania (CSAO) have become a noteworthy and influential region in the world of cryptocurrencies.

Although they rank as the third-largest market globally in terms of the sheer volume of transactions, what distinguishes CSAO is its widespread grassroots adoption of cryptocurrencies.

According to Chainalysis, the CSAO region boasts six countries within the top ten of the Global Crypto Adoption Index. These countries include India (ranking first), Vietnam (third), the Philippines (sixth), Indonesia (seventh), Pakistan (eighth), and Thailand (tenth).

India, in particular, leads the world in terms of grassroots cryptocurrency adoption, underlining the significant presence and growth of crypto usage among the general population.

The Mosaic of Crypto Adoption in CSAO

Going into further analysis of how the crypto industry has performed in the region, Chainalysis noted that the CSAO region is not uniform in terms of cryptocurrency adoption. Different countries within this region have varying levels of adoption and use of cryptocurrencies. 

It added that the reasons behind crypto adoption differ from one country to another within the CSAO region. These reasons influence the extent to which people in these countries use various cryptocurrency services.

For example, while centralized cryptocurrency exchanges are popular in most countries within the CSAO region, the specific areas of interest in the crypto space differ from country to country. In the Philippines, a substantial portion of web traffic related to cryptocurrencies is directed towards gaming and gambling platforms.

On the other hand, in Vietnam, a smaller percentage of crypto-related web traffic is associated with gaming and gambling platforms compared to the Philippines. 

Meanwhile, Pakistan and Vietnam are more active in peer-to-peer (P2P) exchanges, which are often used in emerging markets or regions where there are stricter financial regulations. This diversity in adoption drivers contributes to distinct usage patterns in different CSAO nations.

The growth of DeFi 

According to Chianalysis, the past year saw an increasing impact of decentralized finance (DeFi) around the CSAO region. Figures reveal that DeFi transactions accounted for 55.8% of its total transaction volume in 2023 which is higher than what it was in 2022.

Additionally, beyond personal use of DeFi services, larger institutions are increasingly adopting DeFi, as 68.8% of the total transaction volume involves transfers of $1 million or more. 

This indicates that institutional players are actively participating in DeFi, which is often seen as a sign of maturity and broader adoption in the financial sector.

The Philippines: Gaming and Community Building

Zooming into each country, the report highlighted that the Philippines stands out as an example of a country with a strong interest in play-to-earn games, with Axie Infinity being a notable example. 

Axie Infinity is seen as a significant turning point in the adoption of cryptocurrencies in the Philippines. It gained wide recognition and marked a pivotal moment for crypto adoption in the country.

Several factors also contributed to this characteristic, among which is the presence of a huge young population in the Philippines that is also technology-savvy. 

This demographic is more likely to embrace digital innovations like cryptocurrencies. Another factor is the availability and usage of digital wallets.

Furthermore, the pandemic, which led to lockdowns and people staying at home, increased the demand for entertainment and ways to earn supplemental income, making play-to-earn games like Axie Infinity more appealing. 

This is also tied to the Philippines’ strong presence on social media platforms, which facilitated the viral spread of Axie Infinity and encouraged user engagement.

Chainalysis also noted that while Axie gained massive adoption in the country, it has experienced fluctuations in usage and token price. However, the first impact in the nation has played a crucial role in introducing people to crypto wallets, which can be used for various cryptocurrency-related activities beyond gaming.

In the Philippines, regulatory clarity and the involvement of major traditional internet companies have been crucial in promoting wider cryptocurrency adoption. 

The government has taken steps, such as establishing a special economic zone with tax incentives and a regulatory sandbox, to foster innovation and investment in the cryptocurrency sector. 

Additionally, private sector firms like Philippines Airlines and Cebuana Lhuillier are integrating cryptocurrencies and blockchain technology into their services, reflecting a positive trend in crypto adoption and usage in the country.

Pakistan and the use of Stablecoins

In Pakistan, crypto adoption is primarily driven by necessity, particularly in the face of high inflation and currency devaluation. With inflation that exceeds 29.4% and the rupee’s sharp devaluation, citizens are looking for a safe haven.

Chainalysis noted that with this in place, crypto has served as a means of wealth preservation and investment when traditional options are limited. 

On a similar note, Pakistanis are turning especially to stablecoins as citizens are restricted from holding physical foreign currency.

Stablecoins are a type of cryptocurrency designed to maintain a stable value, often pegged to a traditional currency like the US dollar. They provide a reliable store of value and are less prone to the price volatility typically associated with cryptocurrencies like Bitcoin or Ethereum. 

The report also revealed that despite an official ban on cryptocurrency trading in Pakistan, individuals and businesses in the country continue to participate in peer-to-peer markets and informal exchanges to acquire and trade digital assets. 

Although traditional on-chain data may not fully capture the extent of cryptocurrency adoption in Pakistan because a significant portion of it occurs through off-chain or informal methods.

Additionally, Chainalysis stated that the need for clear and comprehensive regulatory frameworks will unlock the potential benefits of cryptocurrencies for the people of Pakistan. This is because of the huge demand for crypto in the face of regulatory clampdown.

India: A Crypto Leader Amid Regulatory Complexities

India is ruling the world based on the report released by Chainalysis. The country is recognized as the largest cryptocurrency market in the Central and South Asian region (CSAO). Despite facing regulatory and tax complexities, there is strong grassroots adoption of cryptocurrencies in the country.

Although, over the past year, Indian regulatory authorities have made efforts to provide clearer guidelines and regulations regarding cryptocurrency usage such as extending anti-money laundering rules to cover cryptocurrency transactions, among other developments, it has also enforced high taxes on cryptocurrency activities, including a 30% tax on gains and a 1% tax on all transactions, referred to as Tax Deducted at Source (TDS). 

This means crypto platforms deduct the tax amount from the user’s balance at the time of the trade. Chainalysis said that the introduction of TDS led to increased web traffic from Indian users to international cryptocurrency exchanges. 

However, the uneven enforcement of these regulations might lead some Indian users to seek less-regulated exchanges.

Similarly to other nations in the same region, India has a high taste for crypto and the presence of consistent enforcement of local rules and regulations will create a level playing field in the Indian cryptocurrency market.

Read also; Stablecoin market evading US regulation: Chainalysis

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