The country’s rich are raring to go, but the government has other considerations to juggle. Catch up or be left behind?
Imagine a world operating on cryptocurrencies and a parallel stream of jobs created because of the digital asset. Far-fetched? Those days are not too far ahead, reckons one CEO of a tech investment firm in India.
For example, El Salvador recently granted recognition to Bitcoin as a legal tender. That is not to say all countries will follow suit, but the point is that many developed nations like the US, Germany, Japan and South Korea have already legalized crypto transactions in their jurisdictions, according to Rameesh Kailasam, the Chief Executive Officer of IndiaTech.org.
Kailasam is a leading voice from the industry association that represents India’s consumer Internet start-ups, unicorns and investors. His interest is canvassing for a regulatory mechanism for cryptocurrencies in the country.
Regulatory clarity for crypto
IndiaTech serves as a collaborative platform to support positive business growth and has urged the government to promulgate conducive policies and regulations. The association recently released a white paper proposing a comprehensive five-point framework aimed at providing regulatory clarity to crypto assets and exchanges in India. The paper highlights the myriad opportunities that crypto offers to the country’s burgeoning market.
Crypto assets serve as digital gold or tokens powering decentralized applications. They could be used for transfers, remittances, trading, lending, capital raising, et al., potentially impacting sectors ranging from law to logistics to media and cybersecurity.
According to Kailasam, refreshingly new job verticals will emerge out of the virtual coinage’s boom. “Some possible job profiles in the near future may be crypto solutions architects, Bitcoin project managers, cryptocurrency journalists and crypto lawyers. In fact, Bloomberg has already created a New York-based Crypto Managing Editor position to lead the coverage on cryptocurrencies.”
A five-point framework defined
The framework proposed to the government aims to define the steps to regulate the crypto industry and mitigate risks, while fostering innovation. Kailasam feels that “crypto has a bright future in India. It is at a unique stage to attract foreign direct investment, generate employment, and foster innovation, which can enhance India’s strategic importance within the global landscape. While there are associated risks, the government can address these threats with policies that do not stifle, but support the promise of these emerging technologies.
- The recommendations start with defining crypto assets and introducing a system for registering local home-grown crypto exchanges in India. Define cryptocurrencies as digital assets, not currencies, and grant them recognition as digital assets: similar to gold, stocks, or marketable securities. Several countries, including Australia, Germany, Japan, Singapore, South Korea and the United States have taken a similar approach.
- Next, introduce sufficient checks and balances through well-defined reporting mechanisms and accounting standards to counter suspicious activities.
- Enable taxation (direct and indirect) to treat crypto assets similarly to other current assets, generating additional revenue for the State.
- Allow innovative uses of crypto by businesses and create specific safeguards to protect retail investors from fraud
- Encourage self-regulation for the industry, including a code of conduct and regulatory framework in alignment with the government’s primary objective of safeguarding consumers and financial stability.
According to Sumit Gupta, Co-Founder & CEO, CoinDCX: “The time has come to define the true nature of crypto in India. More than being a replacement of fiat currencies, crypto by nature is a strong digital asset, a store of value. This will bring immense clarity on its investment potential. This effort by IndiaTech helps bring a fresh perspective to the regulatory discussions that are going on today. This, if accepted, will lead to immense potential for Indians to participate in this new global asset class.”
India as a crypto innovation hub
As with many developed and developing countries, India has been adopting a cautious approach to crypto assets for a long time. But Kailasam is of the opinion that many countries have now advanced to considering crypto a digital asset rather than a currency. “Our government and regulatory bodies should also find ways to regulate this new class of digital asset, and not call it a currency. With this approach, India will capitalize on the crypto industry’s massive potential. What the country needs is to grant the sector the much-needed regulatory clarity.”
Kailasam is hopeful that the government will work with industry to regulate the sector and adopt a progressive approach in the process. Introducing reasonable checks and balances will ensure that India is able to embrace and adopt new-age technologies by adequately leveraging their potential.
Last March, the Supreme Court of India delivered a verdict supporting crypto assets, citing a lack of empirical data to justify the ban. This paved the way for lifting prior restrictions. Meanwhile, the Union government has proposed the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, intended to facilitate India’s own official digital currency issued by the Reserve Bank of India (RBI) and allowing experimentation with other crypto assets.
Noted Kailasam: “The IT and IT-enabled Services industry supported the economic boom of the country for us to become a service-oriented economy over the last two decades. Now is the time for cryptocurrencies to be recognized, if we aspire to be a US$5tn economy. We can become a home to blockchain innovations that could impact the Indian economy similar to IT services and the Internet. This will allow Indians to participate in promising new wealth creation opportunities,” Kailasam hoped, adding that investors, entrepreneurs and consumers see huge potential for Indian start-ups in the crypto space.
According to him, almost 1.5 crore Indians are already holding cryptos worth INR 15,000 crore: “We have created a ring-fencing around the concept, instead of giving preference to Indian crypto exchanges. We don’t really want the numbers to grow further to such an extent it becomes quite difficult to control the transactions, do we?”
In the long run, the availability of tech talent will play an important role in making India a crypto innovation hub. In this regard, IndiaTech.org is willing to collaborate with the government on behalf of industry and liaise with regulators. Think tanks such as NITI Aayog can create a conducive policy environment. This will also support the process of defining a self-regulatory framework for the industry, opined Kailasam.