EVOLUTION OF INDIA’S BLOCKCHAIN, CRYPTO & WEB3 ECOSYSTEM
EVOLUTION OF INDIA’S BLOCKCHAIN, CRYPTO & WEB3 ECOSYSTEM
Why This Topic Matters for IAS Prep
Web3, blockchain, and crypto are no longer just tech buzzwords — they sit at the intersection of economy, regulation, digital governance, cybersecurity, finance, and global geopolitics.
This note provides a holistic, exam-aligned understanding.
Concept Primer: Web3
Web 1.0: Read-only
Web 2.0: User-generated content
Web3: Decentralised, blockchain-powered, user-owned internet
Core idea: Power shifts from central platforms → users, via blockchain & smart contracts.
Why Blockchain Matters
Ensures transparency, traceability, immutability → key for governance reforms.
Enhances supply chain audits, record-keeping, identity verification, public service delivery.
Foundation for tokenised assets, digital payments, secure data exchange.
Use these points in GS3 answers as “value enhancers”.
India’s Web3 Landscape: Key Facts (2025)
Funding Landscape
$653 million raised in first 10 months of 2025 (↑16% from 2024).
Dominated by international funds due to regulatory clarity abroad.
Talent Advantage
1 in 5 Web3 developers globally is Indian.
But startups incorporate abroad due to lack of fundraising support & regulatory norms.
Adoption Indicators
India leads in Web3 wallet usage → robust on-chain activity.
Significant potential for stablecoin adoption.
VC Paradox
Indian VCs hold $20 billion unallocated capital, but <1% goes to Web3.
Tokenised Assets (RWAs)
Globally, giants like BlackRock, Franklin Templeton, Hamilton Lane tokenised fund units → crossed $15B in value.
India’s Regulatory Position: “Cautious but Observing”
No dedicated crypto law or regulator yet.
India follows a risk-managed, wait-and-watch strategy.
Legal ambiguities slow adoption of:
Stablecoins
Tokenised securities
Web3 fundraising mechanisms
Answer-Ready Phrase
“India’s regulatory posture can be described as constructive caution—encouraging innovation while prioritizing consumer protection and macroeconomic stability.”
Potential Benefits of Web3 & Crypto (Economic + Governance)
A. Economic Benefits
Faster, low-cost, global payments.
Tokenisation of real-world assets → democratizes investments.
Attracts FDI in frontier technologies.
B. Governance Benefits
Transparent PDS, land records, welfare delivery.
Fraud-resistant databases.
Improved contract enforcement via smart contracts.
Key Challenges for India
| Challenge | Impact |
|---|---|
| Absence of comprehensive regulatory framework | Uncertainty for investors & startups |
| Taxation ambiguity | Hinders domestic innovation |
| Startups registering abroad | Loss of intellectual capital & revenue |
| Grey zones in legal stance on stablecoins & RWAs | Limits institutional adoption |
What India Needs
Short-Term Measures
Regulatory sandbox for Web3 projects
Clear guidelines for stablecoins & tokenised assets
Reduce TDS burden on crypto transactions
Long-Term Vision
Establish a Digital Asset Regulatory Authority (DARA)
Build India’s sovereign blockchain stack
Integrate blockchain with Digital Public Infrastructure (DPI) — UPI, Aadhaar, ONDC
Pointers
Web3 = decentralisation + blockchain + token economy + user ownership
Stablecoin = crypto asset pegged to a stable value (USD/INR/Gold)
RWA tokenisation = converting real-world assets into digital tokens
On-chain activity = transactions recorded on blockchain
Value Add: 50-Word Mains Answer Summary
“India’s Web3 ecosystem is expanding rapidly, backed by strong developer talent and rising global interest. However, regulatory ambiguity and taxation hurdles push startups abroad. With clearer rules, sandboxes and innovation-friendly policies, India can leverage blockchain for governance reforms, financial innovation and global digital leadership.”
MAINS ANSWERS
- One in five Web3 developers globally is Indian, yet most Web3 startups incorporate abroad. Analyse the reasons and suggest policy interventions to reverse this trend.
- Explain the concept of tokenised real-world assets and assess their potential in India’s financial markets in the context of global developments.
