The report. titled ‘Unlocking the Web3 Potential: India’s Journey from a Talent Exporter to a Product Powerhouse’, said India is home to more than 900 enterprises in the Web3 sector, or the third generation of the World Wide Web, and accounted for 11% of the global Web3 developer community in 2022, securing its position as the third-largest talent pool of developers globally.
“As we witness the evolution of Web3, its potential for transformative growth becomes increasingly evident,” Shravan Shetty, managing director, Primus Partners, said in a statement. “Our study thoroughly explores this expanding landscape, offering valuable insights that illuminate the path forward for India with strategic attention to coordinated global efforts, robust domestic legislation, heightened awareness, and a nurturing business environment.”
The report cited blockchain analysis firm Chainalysis’ claims of India leading in grassroots crypto adoption globally and ranking as the second-largest market in terms of raw transaction volume in 2022.
It said the growth was propelled by a thriving startup environment, abundant talent, widespread internet accessibility, digitally adept population and an increasing interest in Web3 technologies.
It highlighted that the transformative potential of Web3 extended across various sectors and said some of the promising use cases included supply chain management, privacy in healthcare, education and experience certificates, voting systems and identity management.
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However, the report highlighted that challenges persisted in the form of taxation issues and ease of doing business. It said the high rate of tax deduction at source introduced by the Finance Act of 2022 led to a shift of trade to foreign platforms and the grey market, undermining consumer protection efforts of compliant Indian platforms.
The report advocated a recalibration of the tax framework, emphasising that taxation should support compliance and encourage participants in monitored transactions, rather than driving them away. It underscored the importance of clear guidelines and specific regulations for Web3 businesses, aligning with Startup India recognition.
Further, it emphasised that access to UPI and banking rails within the virtual digital assets ecosystem remained restricted, leading users to opt for foreign platforms and compromising payment security.
“As a global consensus was taking shape, there was a need for India to advance its domestic policies, creating a conducive environment for Web3 businesses by implementing forward-thinking legislation,” said the Primus Partners report. “The report underscores the need for a collaborative blueprint, emphasising global taxonomy, minimum standards, flexibility, and coordinated monitoring. Advocating for comprehensive domestic legislation, it suggests a principle-based approach, clarity in coverage, identification of regulators, and empowerment of self-regulatory organizations.”
