South Asia’s economic stability is increasingly intertwined with cross-border financial flows, particularly migrant remittances, which form a critical pillar of external sector resilience across the region. As remittance inflows continue to expand in 2025, they simultaneously expose structural inefficiencies within traditional transfer systems including high transaction costs, correspondent banking frictions, and currency volatility. In this evolving financial environment, cryptocurrency has begun to emerge not merely as a speculative asset class but as a potential cross-border settlement mechanism.

This article examines whether the rapid growth of digital asset adoption in South Asia is translating into functional use in remittance corridors. By linking remittance dependence, cost inefficiencies in formal channels, and measurable increases in crypto transaction volumes, it assesses whether cryptocurrency is evolving into a parallel settlement rail with implications for monetary sovereignty, financial regulation, and regional economic governance.

Remittance Flows in South Asia

Remittances remain a core component of external finance in South Asia and continue to grow into 2025, reinforcing their macroeconomics significance. According to the reports, personal remittances received in South Asia in 2024 was 4.4% of the combined GDP of South Asian States. At the country level the latest official data illustrate the concentration and scale of the flow of remittances. India’s inward remittances reached a record USD 135.46 billion in FY 2024-2025, a record high and a 14 percent increase from the last year. Bangladesh recorded a historic fiscal year inflow of about USD 30.4 billion in 2024-2025, the highest on record and a major source of reserve accumulation for Dhaka. Pakistan’s remittances rose markedly over the 2024-2025 cycle as according to the reported total inflow from July 2024 to June 2025 was USD 38.3.2 billion. Nepal’s remittances flow also show a sharp increase, according to the macroeconomic and financial situation report based on first six months of the current fiscal year 2025/26, the remittance inflows increased by 39.1 per cent to Rs. 1,062.93 billion during the review period, compared to a modest 4.2 per cent growth in the same period last year. Similarly, Sri Lanka’s official bulletins recorded a recovery of worker remittances in 2025 and stated that from January to May 2025 Sri Lanka received a remittance amounted to USD 3.1 billion. Bhutan also experienced a strong boost in remittances inflows in 2025 which is backed by its hydropower capacity.

This continuous large flow of remittance in South Asia occurs alongside enduring frictions in formal transfer channels. According to the Reserve Bank of India, the global average cost of sending $200 remains 6.7% which is above the G20’s 5% target and the UN’s 3$ sustainable development goal.  Above this several Gulf - South Asia corridors exhibit other charges also due to correspondent banking frictions and corridor structure. Taken together the large remittance volumes in South Asia and persistent cost inefficiency in formal transaction channels establish an environment for South Asian states to adopt alternative settlement and transaction ways such as crypto-based mechanisms.

Widespread use of cryptocurrency 

Recent global adoption indices confirms that South Asia has become one of the most dynamic regions for cryptocurrency engagement, with implications for remittance use. According to the 2025 crypto adoption index by Chainalysis, India secured the top position worldwide in overall crypto adoption across retail usage, reflecting pervasive grassroots digital activity. Pakistan and Bangladesh also feature prominently, with Pakistan ranking among top three in Asia and Bangladesh within top 20 which indicates that widespread digital asset usage in South Asia exists beyond India’s large market also. Empirical transactions volume statistics also underscores this regional expansion. Analysis from TRM labs shows that between January and July 2025 the total crypto transaction in South Asia reached approximately USD 300 billion which is an 80 percent increase from the last year and makes South Asia the fastest growing global crypto adoption hub. Stablecoins (which are designed for value transfer rather than speculation) alone accounted for a significant proportion of this volume, with transitions worldwide exceeding USD 4 trillion from January 2025 to July 2025 which is a rise of 83 percent compared to 2024. This scaling in both value and growth rate suggest that digital assets in South Asia are moving beyond investment tools and are used as functional transfer mechanisms capable of supporting high volume cross border transactions. Importantly, the 2024-2025 chainalysis report notes that in Central and South Asian States a large share of transaction activity is concentrated in retail sized transfers of below USD 10,000 which is a bracket that closely aligns with typical migrant remittance sizes rather than institutional trading flows. Similarly, the International Monetary Fund (IMF) in its Global Financial stability report of 2023-2024 stated that in emerging and developing economies crypto adoption is strongly correlated with remittance dependence and inflation volatility, suggesting that digital assets are increasingly used for cross border payments.

Region wise trends within Asia further illustrate this diffusion. Data indicates that the Asia Pacific region including South Asian markets has experienced a year-on-year 69 percent increase in crypto transaction value, rising from roughly USD 1.4 trillion to USD 2.36 trillion from July 2025 to June 2025. A significant portion of this expansion was driven by activity from India and Pakistan, both of which contributed materially to on chain volumes in the region. Moreover, the Financial Action Task Force (FATF) in its 2023 targeted update on virtual assets acknowledges that virtual assets are increasingly being used for peer-to-peer cross border transfers including remittance type transactions in regions with large migrant populations and high transfer costs.

Country level engagement patterns reinforce these aggregate metrics. Independent research shows India is leading global adoption not only in rankings but also through significant retail and DeFi participation, and this trend sustained despite the Indian government’s 30 percent tax on crypto gains which indicates real use demand of crypto rather than purely speculative interest. In Pakistan, the establishment of the Pakistan Crypto Council (PCC) in March 2025 and the launch of Pakistan Virtual Assets Regulatory Authority (PVARA) in July 2025, signalled Government’s efforts to formalize and support growing crypto usage. These institutions aim to develop infrastructure and licensing regimes that could further embed cryptocurrency into formal economic activity, including remittance corridors also.

Taken together, the convergence of high retail transaction volumes, dominance of stablecoins, IMF-documented correlations between remittance dependence and crypto usage, and FATF recognition of cross-border peer-to-peer transfer activity provides substantive evidence that rising crypto adoption in South Asia is materially linked to its growing use as an alternative remittance channel.

Challenge for Policymakers

The evidence presented demonstrates that the expansion of cryptocurrency adoption in South Asia is not occurring in isolation from broader macroeconomic realities. The region’s heavy dependence on remittances, persistent transfer costs above global targets, and repeated episodes of currency and foreign-exchange pressure create structural incentives for alternative settlement mechanisms. While cryptocurrency has not replaced formal remittance systems, the data suggest that it is emerging as a complementary and, in some cases, substitute channel. 

For policymakers, the central issue is no longer whether crypto adoption is increasing, but whether its growing role in remittance flows will reshape financial oversight, regulatory capacity, and monetary control in South Asia. Managing this transition through regulation, integration, or containment will determine whether digital assets enhance financial inclusion or complicate regional financial governance in the years ahead.

(The writer is a PhD Research Scholar at Jamia Hamdard University, New Delhi. Views expressed are personal. He can be reached at Yadavsachin0406@gmail.com )