As the government moves closer to opening the curtains on its bill to regulate cryptocurrencies, the crypto exchange industry is hoping for a balance between protecting India’s financial stability and possible innovation. thanks to blockchain technology. Ashish Singhal, co-chair of the Blockchain and Crypto Assets Council (BACC) and founder and CEO of CoinSwitch Kuber, explained to Pranav Mukul and Sandeep Singh the factors that have led to the proliferation of crypto investments in the country and the future of crypto exchanges. . Edited excerpts:
Now that there is a clear indication that cryptocurrencies are not recognized as legal tender, what is the future of these digital coins as a mere asset class?
First of all, crypto exchanges and companies never expected India to adopt cryptocurrencies as legal tender. India, being a sovereign country, should have capital controls, financial stability. It makes sense for countries where there is instability, but for India, it doesn’t make sense to give control to a cryptocurrency.
We as an industry support the government and believe that a CBDC (central bank digital currency) is the right way to solve the problem of digitization. Money is not digital today and CBDC is the right way to solve this problem and we have never argued for crypto to be legal tender in India.
Second, it is not a simple asset class. Asset class is the most important use case for cryptocurrencies. The next Google, Facebook and Microsoft will be built on the blockchain and will hopefully come from India. So the scope is much wider. It’s the new Internet in the making, and it’s not just about exchanging a commodity. Commerce happens because of its use case.
What role will crypto exchanges play in the next 5-10 years and what problem do you hope to solve?
Think of us as the world’s stock exchanges. Amazing companies are doing IPOs, creating value, and an NSE or BSE provides that investment access for these companies. The use cases for crypto might be smaller, but these use cases are solved in amazing ways. Whether it’s Covid-19 certificates, checks issued on the Ethereum blockchain in the United States.
This technology solves many real world problems, and these are the problems that we see many Indian companies solving. We will be the custodians for retail users to invest in these companies. Think of us as an exchange equivalent in the world where crypto companies create value.
Could you give us an idea of ââwho in India invests or is invested in cryptocurrencies?
Today 45% of our users are from level 1 cities and 55% are from level 2 and level 3 cities. Most of our users are very young. This is the Gen Z population, which is very excited about crypto. The average age is around 25-26 years old on our platform which invests in crypto. People with over 4,000 PINs have invested in crypto – so it is not just people in Tier 1 cities who have invested, but all of India is investing in crypto through CoinSwitch Kuber. To give an idea of ââwhat kind of money they are investing – on average they invest around Rs 10,000 every month in crypto and the value drops when you visit Tier 2 and Tier 3 cities.
Does the explosion in the number of investors over the past year explain the shift in the government’s position from a total ban to regulation?
Adoption definitely helps. The government is able to see use cases beyond currencies.
When you think of crypto as a currency, there are a lot of issues – terror, money laundering. But our discussions with the government over the past few weeks indicate that there is a broader agreement to ensure that customers are protected, financial stability is enhanced, and that India is able to take advantage of crypto technology and building the next generation of businesses on the blockchain. Developments that are also happening outside – from time to time countries are embracing crypto. This all culminated in the ban discussions all the way down to our current position, which is that the government agrees that the use case is much more important and that we should have progressive regulations, so that we can guide everyone. in the right direction and do not miss the innovation.
Regarding the proliferation of cryptocurrencies over the past few years, what explains how this happened?
I would say there are several factors to this and Covid has helped, but let me take a step back. Since 2018, crypto has been banned in India. The whole crypto revolution was happening in other countries and the adoption rate was increasing. Crypto is now a household name in the United States. Although India is not part of this equation, but in the two-year period after the RBI ban, the revolution was happening outside and Indians were learning.
The Indians were therefore not behind due to factors such as the lack of internet penetration. We were almost side by side to figure out what those developments were and we wanted to be part of that ecosystem. Once the Supreme Court verdict came down, it gave the Indians an opportunity to discuss it. In a way, it was the residual demand generated in those two years that drove the growth in the last 1 to 1.5 years.
Following the announcement of the introduction of the bill, we saw a huge sell-off of cryptos in India. The crypto industry then rushed to champion its cause. Where do you think the gap has stayed?
The gap remained because the bill had not come out. We told users that the details of the bill were still not known and urged them to keep calm – to do their own research before reaching any hasty conclusions. Investors should wait for the government’s statement on this and not rely on secondary sources. This is also what we tell our users. Our discussions with the government have been very positive and we believe that the right steps will be taken to ensure that crypto investors are protected and encouraged in the right direction.
While waiting for regulation, is there a concern in the industry and how do you feel?
All of our discussions with the government over the past few weeks have been very positive. We understand that financial stability is important, that customers need to be protected, but at the same time, the benefits of crypto technology are far beyond. I think there is general agreement between innovators and government on this. We very much hope that the government will take the right steps to create progressive regulations and support this industry. Obviously, there is a need to put safeguards around the monetary use cases of crypto, but we also need to enact regulations so as not to suppress the technology itself.