With over 1,200 web3 startups and billions in funding, how long can India’s blockchain sector endure without definitive regulations?
India’s Web3 Surge
Just a few years back, India’s blockchain environment was primarily a testing ground for retail traders dabbling in crypto. Today, the narrative has changed significantly.
The India Web3 Landscape Report 2024 provides insights into the notable transformations in startup funding, corporate adoption, developer engagement, and regulatory dynamics, painting a picture of the industry’s evolution.
A defining revelation is India’s leading role in cryptocurrency uptake. For the second consecutive year, the nation has topped global charts, underscoring its significance in the digital asset landscape.
The startup ecosystem has significantly contributed to this rise. There has been a strong influx of investment in foundational blockchain infrastructure and financial services, while sectors focused on entertainment, like web3 gaming and digital collectibles, have found it difficult to attract new funding.
However, sheer momentum does not guarantee steady progress. Advancing beyond initial stages poses substantial challenges, particularly due to limited access to larger funding sources.
Many Indian entrepreneurs are now looking to international web3 venture capital and alternative funding methods, including token sales, to navigate these challenges.
Adding to the complexity is regulatory ambiguity. High taxation on cryptocurrencies and strict anti-money laundering laws have compelled some startups to establish operations in more favorable regions.
So what is the current status of India’s web3 landscape? To explore this question, we’ll delve into the report’s findings, analyzing investment patterns, corporate adoption, developer activity, and the regulatory influences affecting the future of blockchain in the country.
Funding Returns, but Not for All
After a cautious period for investors, the report reveals a significant rebound in funding, with blockchain startups acquiring $564 million in 2024 — a 109% increase from the previous year.
This recovery follows a slow period in 2022 and 2023, when regulatory concerns and global market conditions dampened investor enthusiasm.
Currently, India is home to over 1,200 web3 startups, engaging in decentralized finance, blockchain infrastructure, and entertainment. While total funding in the sector has surpassed $3 billion to date, the landscape of investment has evolved.
Infrastructure initiatives have become the top focus, securing a significant portion of new investments, demonstrating that stakeholders are prioritizing the foundational elements of blockchain rather than speculative endeavors.
Startups centered on infrastructure raised $437 million in 2024, which is an extraordinary 224% rise from the previous year. This capital primarily supports advancements in layer-1 and layer-2 scaling, decentralized physical infrastructure networks, and middleware platforms.
The financial services domain has also attracted renewed interest, with blockchain-based finance investments rising to $86 million, up from $55 million in 2023.
Funding related to DeFi has shown signs of recovery, especially in areas such as staking, liquid staking, tokenized real-world assets, and multi-chain financial products.
However, not all areas have seen similar growth. Blockchain initiatives tied to entertainment, including web3 gaming and digital collectibles, experienced a downturn, with funding dropping from $60 million in 2023 to $41 million in 2024, suggesting a reduced interest from investors in this sector.
Even with the overall recovery, acquiring large-scale investments remains challenging, particularly for later-stage companies.
The absence of significant funding rounds ($100M+) since 2022 indicates that domestic investors are still cautious, many refraining from participating due to India’s high taxation on virtual digital assets and persistent regulatory uncertainties.
To navigate this landscape, many startups are reaching out to international web3 funds and ecosystem grants from blockchain foundations.
Crowdfunding and token-based fundraising have also surfaced as crucial alternatives, providing early-stage ventures with avenues for growth outside the traditional venture capital ecosystem.
Gen Z Takes the Lead
A notable trend in 2024 is the resurgence of retail investors flocking to centralized exchanges.
Increasing asset prices have attracted fresh participants into the market, with a significant preference for established cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH), which account for 45% of retail holdings.
Additionally, trading volumes for memecoins have quintupled in 2024 compared to other asset classes, indicating a shift towards high-risk, short-term speculation.
Gen Z, which constitutes 35% of India’s cryptocurrency investor demographic, has been instrumental in driving the memecoin surge, focusing on quick gains through investments in volatile assets.
In contrast, investors aged 40–45 display greater risk tolerance through larger trades, with those in their 40s, on average, investing three times more than younger investors.
Futures and options trading have gained popularity, with 66% of crypto derivatives traders under 35 years old, showcasing that younger investors are becoming increasingly comfortable with leveraged products.
Conversely, women remain significantly underrepresented in derivatives trading, with only one in ten futures traders being female, highlighting the need for greater inclusion.
The market is still largely retail-driven, with 96% of transactions being under $12 per position. Nonetheless, 45% of traders are active on a daily basis, reflecting robust engagement.
A significant behavioral shift has been the rise in the use of risk management tools — 59% of futures traders now employ stop-loss mechanisms, indicating a maturation of strategies as retail participants refine their approaches.
On the enterprise front, blockchain adoption is also on the rise, with governmental and private sectors integrating blockchain solutions into their processes.
Several states have implemented blockchain technology for land registries, digital certifications, and supply chain transparency.
Private companies are equally eager to harness the advantages of blockchain. Corporations like Reliance, Bajaj, and Tata are collaborating with web3 startups and global blockchain networks to boost efficiency and security in their operations.
For example, Reliance Jio is teaming up with Polygon to incorporate web3 technology across its ecosystem, which has 450 million users, focusing on digital transactions and loyalty initiatives.
In the food sector, Mother Dairy has harnessed blockchain for real-time tracking within its supply chain, enhancing transparency and trust among consumers. Similarly, Flipkart has integrated blockchain technology, onboarding over 3.6 million wallets via its FireDrops rewards program.
Growing Developer Workforce
According to the report, India currently contributes 8% of the global full-time web3 developer workforce and 12% of the total developer pool — a rise from just 5% a decade ago. In 2024 alone, India accounted for 17% of all new web3 developers globally, surpassing any other country.
With an impressive 28% year-on-year growth, India added over 4.5 million developers to GitHub in 2024, making it the fastest-growing developer community worldwide. At this trajectory, India is expected to overtake the U.S. and become the largest developer market by 2028.
The rise of web3 talent is largely fueled by India’s youthful and tech-oriented workforce. Over half of the Indian web3 developers have entered the sector in the past two years, yet attracting seasoned professionals remains a challenge.
Many experienced engineers are being lured away by more lucrative opportunities in artificial intelligence and leading tech firms, resulting in a shortage of skilled blockchain experts.
Ethereum continues to be the dominant blockchain among Indian developers, especially inDeFi and infrastructure projects. However, platforms like Solana and Polygon have gained traction due to lower transaction fees and enhanced developer experience.
Other platforms such as Aptos and Base are also gaining traction, particularly within gaming and the tokenization of real-world assets.
Hackathons have played a vital role in onboarding developers into the web3 space. These events not only provide financial support but also offer networking opportunities with international teams and blockchain organizations.
According to the report, 87% of web3 developers in India have participated in at least one hackathon, and 48% have attended three to five of these events.
In response to this growth, blockchains like Polygon, Solana, and Avalanche are offering India-centric grants and bootcamps to further nurture talent.
Indian developers are actively engaged in core blockchain development, with the report highlighting that 45% contribute directly to core codebases, 30% address bug fixes, and 22% enhance documentation.
Despite these significant contributions, financial rewards remain a concern. More than half (51%) of Indian web3 developers feel their salaries trail behind those of their peers in North America and Europe.
This salary gap could impede long-term development, as experienced developers might be inclined to transition to higher-paying sectors. Addressing compensation disparities and establishing clearer career pathways will be essential for sustaining growth.
The Missing Element in India’s Web3 Advancement
Despite rapid expansion in India’s web3 scene across startups, enterprises, and developer communities, regulatory ambiguity persists as a significant barrier.
In recent years, the government has transitioned from an outright crypto ban to a more balanced perspective. However, ambiguous tax regulations, burdensome compliance requirements, and intermittent enforcement actions continue to challenge businesses and investors alike.
One of the major hurdles is the high tax on virtual digital assets in India. The flat 30% tax on cryptocurrency income, combined with a 1% Tax Deducted at Source on every transaction, has led many traders and investors to migrate offshore.
There are reports indicating that this shift in trading activity from Indian exchanges to international platforms has cost the government billions in potential tax revenues. Despite ongoing appeals for reform, there are no clear signs that tax policies will be revised anytime soon.
Regarding compliance, the strict anti-money laundering measures for virtual asset service providers have added further complexity to the landscape.
In December 2024, the government restricted access to several foreign crypto exchanges lacking AML registration, amplifying concerns that regulation is being enforced through punitive measures instead of transparent legal frameworks.
Meanwhile, the Reserve Bank of India has expressed caution regarding digital assets. The central bank has consistently opposed private cryptocurrencies, citing potential risks to financial stability, monetary sovereignty, and illicit activities.
Instead, the RBI is pushing ahead with its Central Bank Digital Currency pilot, which now boasts over 5 million users and involvement from 16 major banks.
While this indicates a degree of blockchain integration, the RBI’s hesitance toward fully embracing decentralized assets continues to cause friction in the sector.
A glimmer of hope lies in the possibility that India might align its regulations with global standards. The 2023 G20 Leader’s Declaration from New Delhi emphasized the need for international cooperation on crypto regulation, and India has actively engaged with the Financial Action Task Force and the Financial Stability Board.
The International Financial Services Centres Authority has also emerged as a more progressive regulator, offering sandbox approvals for tokenized real-world assets — a move that could set the stage for clearer regulatory frameworks in the future.
Yet, uncertainty continues to overshadow India’s web3 sector. Numerous Indian-founded web3 initiatives have opted to set up in offshore locations with clearer regulations, thereby avoiding the complexities of India’s taxation and compliance systems.
The Path Forward
India’s web3 ecosystem stands at a critical juncture, with two potential avenues ahead.
Should regulatory clarity emerge, investment and enterprise adoption could accelerate, establishing India as a global leader in blockchain technology.
Conversely, if regulatory challenges linger, more projects and talent might migrate abroad, stunting domestic innovation.
For now, India remains one of the most vibrant web3 markets globally, supported by a skilled developer pool, increasing enterprise interest, and growing institutional participation.
Whether the nation solidifies its position as a web3 powerhouse or encounters obstacles due to regulatory constraints will hinge on the policy and investment directions embraced in the coming years.