Author: Adaverse Research Team

Advisors: 6th man Ventures and Coin98 Ventures

Emerging markets provide unique development opportunities for cryptocurrencies and blockchain technology. In Africa, cryptocurrencies have become an alternative to traditional financial systems, gaining popularity in local markets, especially among those who lack access to banking services. Blockchain technology can address issues such as traceability in supply chains, identity management, and ownership disputes, thus holding vast application potential.

In Vietnam, with the continuous economic growth and technological advancement, cryptocurrencies have quickly captured the hearts of young people, with more and more Vietnamese considering cryptocurrencies as a safe and reliable financial option. In India and Africa, due to the lack of banking services in local financial markets and the high volatility of local currencies, the usage of cryptocurrencies is also increasing.

In these regions, digital assets provide a secure and convenient financial solution for locals; conversely, emerging markets offer unique application scenarios and opportunities for digital assets.

Opportunities and Application Scenarios in Emerging Markets

Africa

In Africa, practicality is key to the success of products, including Web3 projects. Given the relatively low GDP per capita and the underdeveloped financial, social, and environmental infrastructure, solutions in the African market must be able to address problems or meet specific market scenario demands, including:

• International Payments: Compared to traditional financial systems, Web3 can enable faster and cheaper international payments, which is beneficial for the African financial market as many African countries have underdeveloped banking infrastructure.
• Digital Identity: Web3 can help solve the issue of legitimate identity by creating secure, private, and verifiable digital identities.
• Traceability in Supply Chains: Blockchain technology can trace products along the supply chain, helping to ensure product quality and authenticity, reducing corruption and fraud in African agriculture and other sectors.
• Decentralized Markets: Web3 can facilitate the establishment of decentralized markets where buyers and sellers can interact directly without intermediaries. This is particularly beneficial for agricultural markets in Africa, allowing farmers to sell products directly to consumers without paying high commissions to middlemen.

These Web3 use cases can effectively address specific and urgent issues faced by various communities in Africa. The decentralization of Web3 allows platforms to be more resilient in handling regional issues, helping to promote financial inclusion and economic development in Africa.

Web3 in Africa primarily adopts an integrated approach, allowing ordinary consumers to utilize this technology. A successful case in this regard is Fonbnk, which allows users to exchange their call time credits for cryptocurrency assets.

The lack of traditional financial infrastructure in Africa presents an opportunity for new technologies like blockchain. 57% of mobile phones in Africa are not connected to the internet, and in some African countries, only 30% of adults own smartphones. In the face of these technological deficiencies, integration and gradual advancement are key.

Not Just Financial Technology

The use cases of Web3 are not limited to financial markets; blockchain technology has significant potential in other non-financial sectors across the African continent. In addition to the aforementioned technological infrastructure challenges, another major issue in Africa is the lack of reliable and verifiable land ownership records, which leads to many disputes and conflicts.

Currently, companies like HouseAfrica and Seso Global are using blockchain technology to create transparent and immutable records that clearly indicate land ownership. Additionally, blockchain technology can be applied in other fields such as healthcare, education, and digital identity, helping these sectors establish trustworthy and verifiable records. In summary, blockchain technology can help address various issues across multiple sectors in Africa.

India

Although India is also an emerging market with rapid economic growth, its economic development differs from that of other developing economies. On one hand, India shows sustained interest in the cryptocurrency space and tends to support new technologies like Web3 and blockchain; on the other hand, the Indian government has not established and implemented effective cryptocurrency regulations, leading to market chaos and hindering industry development.

Since the Supreme Court of India overturned the central bank's ban on digital currencies in 2020, the Indian government has debated the regulation and legal status of cryptocurrencies, but no clear conclusions have been reached so far.

For example, considering risks such as money laundering and financial instability, the Reserve Bank of India has remained particularly vigilant about cryptocurrencies, repeatedly emphasizing the scams and fraud cases that have emerged in the Indian cryptocurrency industry. This external publicity has further heightened concerns about blockchain security, making it difficult for banks and financial companies to provide services to cryptocurrency exchanges in India.

Since the implementation of the new trading tax law in July 2022, trading volumes on Indian cryptocurrency exchange platforms have significantly declined. This law imposes a 1% tax on all cryptocurrency-related transactions exceeding $126 (10,000 Indian Rupees). Additionally, the Indian government levies a 30% tax on all cryptocurrency-related income, leading to a decrease in trading volumes.

The Great Indian Cryptocurrency Exodus

Many cryptocurrency companies based in India have considered relocating to other jurisdictions that are more friendly to the industry, such as Singapore or the United Arab Emirates. Dubai is the best choice, as the UAE has a supportive stance towards cryptocurrencies and has established several tax-free zones that issue cryptocurrency licenses.

Sandeep Nailwal, CEO of Polygon, has stated on multiple occasions that he moved to Dubai two years ago due to the uncertainty of legal regulations in India, which exposed his company and team to risks at any time. While he wishes he could stay in India to promote the local Web3 ecosystem, he is concerned about the brain drain in India's blockchain sector. He lamented that India's legal regulations are driving investors, entrepreneurs, and talent away.

Thus, we can see a stark contrast between India and the UAE regarding Web3 technology and cryptocurrencies; India is filled with contradictions regarding cryptocurrencies, while the UAE has taken a more proactive approach. Recently, Dubai passed a virtual goods law and established an industry oversight agency.

Furthermore, the UAE has introduced special visas for tech entrepreneurs, allowing them to set up businesses and access resources and funding in the country. This policy has attracted many entrepreneurs from around the world, and Dubai is poised to become a new tech hub in the Middle East.

However, for India, the current situation is not the final outcome. Many industry insiders hope the Indian government will recognize India's potential and attempt to establish clear and favorable regulations for the industry, actively and significantly changing the landscape in India.

In fact, blockchain technology, cryptocurrencies, and Web3 can be applied across various sectors, such as:

• DeFi: The globally growing DeFi sector is also thriving in India, where users can access decentralized and intermediary-free financial services such as loans, savings, and interest income using cryptocurrencies and blockchain.
• Digital Identity: In India, Web3 can enhance the security and privacy of users' digital identities. Storing identities on the blockchain can prevent third parties from accessing personal data without authorization.
• Intellectual Property: Web3 can improve the protection of intellectual property for content creators by allowing them to store and manage their creations on the blockchain, giving them more control over the ownership and dissemination of their content.

India has a large pool of tech talent and a highly skilled, quality IT workforce, thus holding immense potential in the digital asset space. The country has a high technology adoption rate, with a large number of internet users and a growing smartphone penetration rate.

Moreover, India has consistently been at the forefront of developing products for international markets. The software and IT services industry in India has been a major exporter, achieving significant success in providing information technology services globally. Therefore, India has the opportunity to lead in Web3 innovation and provide solutions to the global market.

Finally, the development momentum of India's Web3 startup ecosystem is also beginning to show. In recent years, investment in cryptocurrency and blockchain startups has surged, with over 450 Web3 startups in India, among which the most successful include CoinDCX and CoinSwitch.

India's Web3 Startup Ecosystem as of 2022

Data Source: Nasscom

From recent research by NASSCOM, it is evident that India has a large talent pool and a high technology adoption rate, making it highly potential to become a thriving Web3 market. The gap between talent supply and demand in India's tech sector is smaller than in other countries, meaning there is a substantial amount of tech talent available to work on Web3 projects.

The adoption rate of cryptocurrencies in India is also quite significant. Particularly in the past two years, investment in Web3 startups has been steadily increasing, and the current size of the Indian cryptocurrency market is substantial, with approximately 20 million users. According to USISPF data, this user market could add $1.1 trillion in economic value to India's GDP over the next decade.

Data Source: Nasscom

The Indian government has launched various initiatives and programs to promote the development of emerging digital technologies, including Web3 and blockchain. Given India's immense potential in adopting and developing emerging technologies, blockchain technology is expected to have a significant impact on India's economy.

Data Source: Nasscom

Although India ranks third in the global talent pool for Web3, research predicts that India's talent pool growth rate will be the fastest in the coming years. Additionally, India already has a large talent reserve in emerging technologies such as artificial intelligence and data analytics, positioning it to lead the development of Web3 and blockchain in the future.

Furthermore, we must recognize that cryptocurrencies and blockchain technology could potentially improve India's fiscal and tax systems, as India has a relatively complex tax structure and is one of the countries with the highest indirect tax rates in the world. High taxes can reduce consumer purchasing power and business competitiveness, harming economic and population development, and may also stimulate capital flight and shadow economies.

Blockchain technology and cryptocurrencies could be a solution to these issues. By providing transparent transaction tracking and complete traceability, eliminating unnecessary intermediaries, blockchain technology can lower entry costs and processing times, benefiting small business owners and taxpayers, increasing efficiency, and enhancing trust and transparency in tax and fiscal systems by allowing all participants to access the same information. However, the implementation of these technologies will require the government to formulate appropriate strategies and regulations.

The Central Bank Digital Currency (CBDC) issued by the Reserve Bank of India aims to replace traditional fiat currency. This CBDC can bring several benefits, including reduced costs, increased efficiency and financial inclusion, control over the money supply, reduction of the shadow economy, and enhanced security and transparency. However, its implementation requires appropriate planning and regulation by the government to ensure effective outcomes that benefit economic and social development.

Vietnam

According to Chainalysis's 2022 Global Cryptocurrency Adoption Index, emerging markets in Asia lead in cryptocurrency adoption, with Vietnam ranking first and the Philippines second. However, despite its impressive performance, in 2018, the State Bank of Vietnam explicitly prohibited the use of cryptocurrencies as a means of payment, and companies involved in cryptocurrency trading were fined.

Top Five Countries in the Global Cryptocurrency Adoption Index

Data Source: Chainalysis

In addition, Vietnam lacks official regulations related to blockchain technology and cryptocurrencies. However, the approval of the Prime Minister to improve the legal framework is a positive signal, indicating that the Vietnamese government recognizes the importance and potential of blockchain technology and is working to establish a clear and secure regulatory framework.

This legal clarity can help promote further growth and development of cryptocurrencies and blockchain in Vietnam while mitigating risks associated with these technologies, such as money laundering and terrorist financing.

Overall, the Vietnamese government's balanced approach to regulating cryptocurrencies and blockchain can help foster a healthy and prosperous ecosystem, contributing to Vietnam's economic and technological development in the future.

The fact is that Vietnam has maintained its top position for two consecutive years, establishing a solid foundation for cryptocurrency usage. Additionally, the high purchasing power in Vietnam enhances the public's ability to use centralized cryptocurrencies, DeFi, and P2P tools.

The popularity of cryptocurrency-based games in Vietnam also facilitates the widespread adoption of cryptocurrencies. Several successful cryptocurrency companies have emerged in Vietnam, such as Coin98 Finance, Axie Infinity, and Kyber Network, which incentivize more businesses to enter the cryptocurrency market, further increasing the adoption of blockchain technology. The Chainalysis report also noted that cryptocurrency adoption in Vietnam includes both centralized and decentralized tools, with both being highly prevalent, particularly in cryptocurrency-based games like P2E and M2E games.

Most cryptocurrency projects in Vietnam focus on gaming and metaverse aspects, followed by DeFi, NFTs, and infrastructure. As more traditional companies turn to blockchain and integrate blockchain technology into their businesses, Vietnamese cryptocurrency projects have also excelled in fundraising, and these achievements are encouraging, indicating a bright future for the cryptocurrency market in Vietnam.

However, while the adoption rate of cryptocurrencies in Vietnam is high, there is still a need to improve the accessibility and usability of cryptocurrencies. The cryptocurrency industry needs to create specific solutions that meet the needs of Vietnamese users and users from other low to middle-income and upper-middle-income countries, enhancing global adoption of cryptocurrencies.

Blockchain Technology Suitable for Emerging Markets

After discussing the opportunities and use cases that blockchain technology brings to emerging markets, we can observe its potential for future economic growth. For retail investors, institutional investors, and governments, blockchain can serve as a financial tool, bringing significant added value to underdeveloped regions.

While there is currently no one-size-fits-all blockchain technology suitable for all emerging markets (as each market has its unique needs and challenges), certain common characteristics of blockchain ensure its compatibility with emerging markets, such as cost-effectiveness, scalability, accessibility, usability, and interoperability.

Among the various blockchain projects, Cardano is particularly suitable for emerging markets, as it is specifically designed to cater to them. It emphasizes enhancing the development of emerging economies through interoperability, sustainability, and financial inclusion via its smart contract platform.

Additionally, Cardano uses a proof-of-stake consensus mechanism, which consumes less energy compared to other consensus mechanisms used by other blockchain technologies (like Bitcoin), making it more affordable for users in developing countries. Cardano also focuses on education and training, making it suitable for emerging markets that require blockchain technology training and skill development.

In terms of functionality, Cardano has a transaction layer using the cryptocurrency ADA and a computation layer based on the Haskell programming language, Plutus, primarily for executing smart contracts (dApps). Overall, Cardano is an emerging technology that proposes innovative solutions to the limitations of Bitcoin and Ethereum.

Another highlight of Cardano is its vision; Cardano and Hoskinson's vision is to leverage blockchain technology to create a more equitable and human-centered economy, with microfinance being a key part of this vision. Collaborating with Pezesha to create a P2P financial system in Africa is an example of Cardano's commitment to solving real-world problems and improving local livelihoods.

The collaboration with Pezesha to create a P2P financial system in Africa exemplifies how Cardano strives to address real issues and enhance economic access for all. This partnership allows people to borrow and lend in a regulated manner, promoting local financing channels and economic growth.

Pezesha is a Kenyan fintech company focused on microfinance, aiming to provide small loans to small businesses and individuals in Africa. The joint investment in Africa demonstrates Cardano's commitment to the economic development of the continent and showcases its vision of using blockchain technology to solve real problems, such as the lack of financing channels. In short, Cardano has the potential to be a highly suitable blockchain technology for emerging markets.

Blockchain technology can benefit regions that struggle to access traditional financing, especially in Africa, where small businesses are the backbone of the local economy, yet the lack of financing channels poses significant barriers to their growth.

In addition to Cardano, there are several other blockchain technologies suitable for emerging markets. Here, we primarily look at the top three blockchain projects: EOS, Stellar, and Aion.

EOS is a blockchain technology that is very attractive to emerging markets. It focuses on transaction scalability, featuring high transaction throughput and low transaction latency, which can greatly expand and accelerate payment applications and micropayments. Block.one has launched several initiatives to encourage the adoption of EOS in emerging markets. For example, in 2019, Block.one announced a partnership with the online gaming platform Ultra to create an EOS-based gaming platform. Additionally, Block.one has launched a $1 billion investment fund to support application development on the EOS platform.

However, like any emerging technology, EOS faces a range of challenges, including intensifying industry competition from Ethereum, which has a large developer base and an active community. Moreover, security and scalability are key focus areas for EOS and its community.

In contrast, Stellar's technology allows anyone in the world to conduct token transactions, aiding developing countries and regions with underdeveloped financial systems. Another appealing advantage of Stellar is that the platform allows for token issuance and the creation of decentralized applications (dApps) for various purposes, including financial inclusion and humanitarian aid.

Finally, Aion is considered very useful for emerging markets as it can provide solutions to the interoperability issues that frequently arise in traditional financial systems of emerging economies. By enabling interoperability between blockchains, Aion can help promote financial inclusion in these markets and develop new financial services.

However, before deciding which blockchain technology to use, each case must be evaluated individually, taking into account the specific needs of the market and users.

Conclusion

In recent years, blockchain technology and cryptocurrencies have gained increasing popularity in emerging economies in Asia, such as India and Vietnam. Many local markets have begun to utilize blockchain technology to address financial inclusion issues and improve efficiency across various sectors, such as agriculture and trade.

Blockchain technology and cryptocurrencies can play a meaningful role in promoting financial inclusion in these emerging markets, providing people with financial alternatives that allow for safer and more efficient transactions without the need for traditional banking infrastructure.

Moreover, technologies like blockchain can help those who struggle to obtain funding from traditional financial sources, particularly small businesses in Africa, which are the backbone of the local economy but face significant barriers to growth due to a lack of funding. In contrast, the 16 million cryptocurrency users in the Vietnamese market, spread across gaming, metaverse, DeFi, and NFTs, represent a commendable achievement.

For India, with its large talent pool, high digital technology adoption rate, and growing interest in cryptocurrencies and Web3 startups, the country is well-prepared to leverage Web3. However, despite having these technological foundations, the Indian government needs to establish a clear regulatory framework; otherwise, it will continue to suffer from talent loss, and the market of 20 million cryptocurrency users will gradually dissipate.

While these emerging markets still face challenges in adopting blockchain technology and cryptocurrencies, it is foreseeable that cryptocurrency usage will continue to grow in the coming years. Additionally, education regarding blockchain technology is actively progressing, and both individuals and institutions will adopt a more open and inclusive attitude towards blockchain.

In summary, blockchain technology and cryptocurrencies hold tremendous development potential in Asian emerging markets, such as India and Vietnam, helping to address common issues and challenges in these regions, namely financial inclusion and efficiency across various sectors. The development of blockchain technology and the popularization of related education will further promote growth in these emerging markets.