Opinion of Nischal Shetty, Founder and CEO, WazirX: Why We Need Crypto Regulation
But why do we need such regulations?
Looking at the state of crypto today, there is no doubt that there is a plethora of opportunities from an economic perspective. Over the past 5 years, we have seen cryptocurrencies grow to a collective market cap of over $ 2,000 billion. Looking to the future of global economies,
from the World Economic Forum (echoed by Niti Aayog) suggest that more than 10% of global GDP will be stored on the blockchain by 2025. India, in particular, is expected to benefit significantly from cryptocurrencies.
Blockchain, in many ways, is widely viewed as a comparable, if not a replacement, invention of the Internet. India, thanks to our tech-savvy population, has been able to successfully harness the potential of the internet and has become a global phenomenon by becoming a global hub for information technology services. Over the past three decades, India had managed to capture a $ 250 billion market in the ITeS sector, and with regulations favorable to crypto, India could very well be part of another 200 billion industry. billions of dollars. You would think the country is uniquely positioned to embrace, adopt, and pioneer the crypto space.
But despite these opportunities, India has yet to manage to tap the crypto market as well as it could have. The lack of clarity on the Indian government’s position on crypto has put many entrepreneurs and innovative minds in limbo, as the persistent threat of unfavorable regulations looms, as talents from other countries are able to capture successfully a huge share of the market share. .
This leads to a scenario with potentially two outcomes – either Indian entrepreneurs move abroad to pursue their innovative ideas in the blockchain and crypto industry (called brain drain), or India completely loses this inevitable boom. and lags behind other countries in terms of technology and economy – both of which are very unfavorable. Countries like the United States, Japan, Singapore, Thailand, New Zealand, and Israel, to name a few, already have regulations in place (like Japan’s Payments Services Act). , amended in 2016 and the Singapore Payment Services Act, 2020) and which promote entrepreneurship while taking precautionary measures to reduce risk to retail investors.
Even without clear regulations, the Indian crypto startup space is in turmoil. With over 300 crypto startups, generating tens of thousands of jobs and hundreds of millions of dollars in tax revenue, the Indian government should see the vast potential it actually offers. This could very well mean that with favorable regulations, we could see thousands of startups in the crypto space, capture a significant portion of this $ 2 trillion market, significantly boost the Indian economy.
What can regulations do?
Crypto, arguably, is the fastest growing tech trend today. Despite this, there is no doubt that there can be potential abuse of blockchain and crypto (as is the case with any technology. All technological advancements carry the inherent risk of being misused) . Historically, we have witnessed the deployment of crypto for criminal activity (money laundering being the most important case), hacks and breaches of centralized exchanges, fraudulent coin offerings, among other cases of potential use of crypto that can be damaging to an economy.
With proper legal regulations, however, these concerns can be sufficiently addressed. For example, once we have clear legislation on traceability – for example, every Indian citizen would be forced into uniform KYC and AML requirements, which would make it extremely easy to take out bad actors in the space. Taxation is another ambiguous area, confusing investors to invest in cryptocurrencies. Not only will these regulations reduce the possibility of potential abuse, but they will also encourage new actors (entrepreneurs and retail investors) to step in and participate in something that can only be described as the invention of a lifetime.
What can be done?
The Indian crypto scene, while nascent (and despite legislative ambiguity), is extremely serious about its regulation. Exchanges like WazirX, for example, have followed strict self-regulatory measures, subjecting themselves to the same requirements as traditional exchanges. For example, we follow strict policies of KYC and AML and make it very easy for the Indian government to intervene and regulate the industry.
Recently, Indiatech published two brilliant white papers, setting out the
need for crypto regulation in India
a five-point framework on required regulations
. The measures include regulations on exchanges, compliance, verification and reporting processes, taxation of cryptocurrencies, and guidance on how to deal with cryptocurrencies. One thing that really caught my attention was the mention of how cryptocurrencies are inappropriate terms and how cryptocurrencies should be treated as digital assets instead of virtual currencies.
I cannot stress enough how much I agree with this point of view, as crypto, in its current form (with all its volatility), is far from being a currency, but rather a deflationary store of value. Bitcoin is considered digital gold, not a digital Fiat for a reason. While there are certainly use cases where Bitcoin and other cryptos can be used for payments, I firmly believe that these transactions should be viewed as barter, rather than outright purchase using cash. currencies.
Essentially, crypto has the potential to attract significant FDI, generate jobs, and enhance India’s global presence. This comes with associated risks, and the longer the silence of regulators, the more India loses on a daily basis. The time for crypto regulation has arrived and I have no doubts that India will respond positively. I Hind.
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