Driven by institutional investors and rapidly expanding decentralized finance (DeFi) activity, India could soon become a hub for cryptocurrency-related investments in the Central, Southern Asia and Oceania (CSAO) region once its government provides clearer regulatory guidance, according to a report published Monday by Chainalysis.

Vietnam and Pakistan, the other two countries that have seen the region’s most rapid crypto adoption in the past year, still depend on speculative retail investors seeking lucrative returns, the blockchain research group noted.

“We’re seeing huge growth [in India’s DeFi ecosystem], with many developers moving into the space after having worked at traditional tech unicorns,” Krishna Sriram, managing director at blockchain security firm Quantstamp, said to Chainalysis in the report, titled “Central & Southern Asia and Oceania Have High Grassroots Adoption But Reasons Vary Greatly Across Countries.”

Between July 2020 and June 2021, the CSAO region received more than $572.5 billion worth of cryptocurrencies, the world’s fourth-largest cryptocurrency market by crypto transaction value, just behind Central, Northern and Western Europe; North America and East Asia.

DeFi is the main driver behind CSAO’s rapidly growing crypto market, the report said, as trading volume on popular DeFi protocols, including Uniswap, Instadapp and dYdX, skyrocketed in the past year.

India led the growth in DeFi adoption in CSAO, according to Chainalysis. The country’s cryptocurrency activity is mostly concentrated in ether and wrapped ether. Both tokens are mainly used for DeFi transactions.

DeFi activity dominates India’s crypto market because centralized exchanges have become more difficult to use due to increasing regulatory scrutiny, according to Quantstamp’s Sriram. Consumers are looking for easier entry to crypto markets, Sriram said.

“Centralized exchanges are becoming more stringent and harder to use for people in certain jurisdictions,” Sriram said. “DeFi doesn’t discern where you’re from or care if it has a relationship with your bank.”

India’s crypto market is also predominated by large institutions, a sharp contrast to Vietnam and Pakistan, which are oriented toward retail investors.

Transactions valued above $10 million represented 42% of transactions sent from India-based addresses, versus 28% for Pakistan and 29% for Vietnam between July 2020 and June 2021, according to Chainalysis. The blockchain data firm categorizes crypto transactions valued above $10 million as “large institutional” activities.

Professional traders are driving Vietnam and Pakistan’s crypto markets, with crypto transactions between $10,000 and $1 million representing the majority in those two countries. Chainalysis said transactions valued in that range came mostly from professional crypto investors.

Joel John, a principal at India-based cryptocurrency investment firm LedgerPrime, said in the report that many Indian investors who previously focused on investing in real estate have turned to crypto after real estate returns decreased.

“There used to be a certain amount of stigma,” John said, adding: “Now, crypto has become the cool place to be.”