It is now up to the Indian government to encourage this ecosystem in a compliant manner. The government has taken great strides already. Be it a TDS on sales or the recent anti-money laundering (AML) provisions under PMLA, the messaging from the government has been consistent: invest fairly and declare the profits
The global crypto ecosystem has grown tremendously in the past three years. More than 200 million users are estimated to have an exposure in the asset class. About 10% of this userbase is from India. Despite regulatory uncertainties, Indian investors have shown significant interest in the space. Many Web 3.0-based businesses have also started offering services that cater to the global ecosystem. Today, we envision a role that Web 3.0 and crypto services can play in India and how we must prepare for this.
Timely regulations will build a vibrant and transparent ecosystem
The crypto asset class has potential to give disproportionate returns to investors over time in a democratic way. This has not been the case with any other technology-based asset in the past. For example, a US citizen had earlier access to global IT stocks in 2000s before Indians did.
It is now up to the Indian government to encourage this ecosystem in a compliant manner. The government has taken great strides already. Be it a TDS on sales or the recent anti-money laundering (AML) provisions under PMLA, the messaging from the government has been consistent: invest fairly and declare the profits.
However, India-based exchanges, which have been the most compliant, have experienced a significant drop in volumes since July 2022 as investors migrated to using non-compliant global exchanges for their trades. This must be addressed quickly.
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View Details »Indian businesses that operate with local offices are best suited to be the partner of choice for the government and the ‘platform of trust’ for the investors. Given that services offered by Indian platforms are on par with global exchanges in terms of products and ease of use, they must be actively encouraged.
The future is blockchain
Blockchain, the core technology behind crypto and Web 3.0, is already implemented across industries and is touted as the base of the next big Metaverse trend.
In this context, crypto and Web 3.0 services originating from Indian businesses can serve a multitude of use cases globally. India will no longer have to be an offshore-based economy but a leader of an industry.
The benefits of these are plenty. 1) This will attract foreign investments into India and 2) the sector will create new jobs that will serve the economy and the youth well.
This needs a consistent approach in terms of education and in incentivizing businesses. We must prepare our youth for this 5-10 years ahead.
Digital transactions and the eRupee
Another key benefit of crypto is the ability to enhance payments infrastructure in terms of time and cost. Cross-border payments via crypto have already given a boost to some countries. Bitcoin, the beacon of crypto asset class, has been at the forefront of this change over the years. Now, central bank digital currencies (CBDCs) are being regarded as a means for governments to enter the ecosystem and gain visibility.
India’s retail CBDC (CBDC-R) started its pilot stage in December 2022 with around 50,000 retail participants across four cities: Mumbai, New Delhi, Bangalore, and Bhubaneswar. Users can transact with eRupee through a digital wallet offered by the participating banks which are stored mobile phones. So far, more than INR 7-lakh-worth of transactions have been facilitated in the retail pilot.
The eRupee is expected to have several benefits, including faster and cheaper transactions, improved financial inclusion, and reduced reliance on cash. It is also expected to make it easier for the government to track transactions and crack down on money laundering.
The eRupee can naturally become the de facto onramp for crypto and Web 3.0 transactions – i.e. investors can transact with crypto and NFTs only via eRupee. This can also be extended to sectors such as online gaming. With the rise of blockchain technology, we expect the e-Rupee to be integrated into decentralized applications, making it an integral part of the Web 3.0 ecosystem in the future.
Challenges must be overcome
While blockchain technology has the potential to revolutionize many industries, it is still a relatively new and complex technology that requires significant expertise to navigate. This can make it difficult for individuals and businesses to understand and use digital assets effectively. Consumer awareness and educational programs in various languages can slowly bridge this gap.
The inherent volatility in crypto asset prices needs proper risk planning by individuals and companies. While we anticipate the asset class to mature over time and decline in volatility, it is still years away.
The adoption and success of the eRupee is dependent on its use cases and regulatory clarity that accompanies its usage. The move towards transparency will keep the ecosystem clean and trustable.
The future remains bright for the crypto and Web 3.0 ecosystem in India with right interventions. We must act, soon.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
(The author, Vikram Subburaj, is CEO, Giottus Crypto Platform)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)Sunday, 12 Mar, 2023Experience Your Economic Times Newspaper, The Digital Way!Read Complete Print Edition »
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