Feedback | What should be done to convince the leaders of the cryptocurrency industry

Neelam Rani and Jatinder Handu

Bedtime childhood stories sometimes teach lifelong relevant lessons that need to be remembered no matter how old one is. Most will recall the classic “turtles and rabbits” in the legend of Isaiah. Remember how fast and smart the rabbit lost to the slow but consistent tortoise in all his zeal and exuberance. The morality of the story is probably due to the fact that the leaders of India’s cryptocurrency have to inaugurate themselves. This will require a period of evidence-based sustainable engagement with Indian policymakers, and perhaps after 30 the Indian crypto market is probably at its lowest ebb, when there is no better time to implement policy prescriptions with Indian policymakers. Government of India announces% tax rate and 1% TDS.

Don’t score a self-goal: Never bother the crown

Recently, at least two interesting incidents have taken place in India, which can be called rather self-motivated Jibs. A senior executive at a foreign crypto exchange at a glittering crypto event in Bangalore on 07 April when the first (mis) reading of Indian public policy towards crypto and the sensitivity associated with India’s payment system environment was merely a reflection of childhood. The National Payment Corporation of India Limited (NPCI) has publicly linked the payment system – Unified Payment Interface (UPI), launched by the Reserve Bank of India (RBI) to transfer funds to crypto exchanges in India in 2022. From a distance, he predicted that his ruthless utterances would be a public policy adventure that could further aggravate the plight of crypto-traders, exchanges and consumers in India, leaving them a kind of banking untouchable (at least perceived).

Assuming that many industry and policy analysts could interpret the foreign crypto exchange executive’s statement (incorrect) as if the RBI was widening the railroad of payments to encourage cryptocurrency transactions in India, a public statement from the NPCI did not immediately reveal that they were aware. If UPI is used to buy cryptocurrencies in India, then many regulated banking and financing companies distance themselves from such transfers to crypto exchanges. While everyone at Indian Policy Ecclesiastes is aware that the RBI is not in favor of private cryptocurrency in India, such a reference was an unwanted and bad time.

The second jib is a news story about the two founders of the largest Indian crypto exchange in Dubai moving away from business. The founders are said to have made this change due to the so-called crypto unfriendly ecosystem in India. Such brain drain is not a new phenomenon. In 2018, exchanges like Vauld and Zebpay relocated to Singapore. Countries with favorable cryptocurrency regulation attract global talent and facilitate such changes by working from any environment. The Indian crypto exchanges that are already registered in Singapore are COIN DCX and Coin Switch Kuber, others have moved to the United States, Cayman Islands, Malaysia or Dubai.

Regtech and Virtual Digital Resources Special Economic Zone (SEZ) in India

Transactions made with cryptocurrencies are viewed with suspicion not only in India, but also in many foreign countries by policy makers and law enforcement agencies, including economic criminals. According to a report by the U.S. Department of Justice’s Attorney General’s Cyber ​​Digital Task Force, criminals have used cryptocurrencies to transact illicit trade, finance terrorism, and use the crypto to finance cyber-attacks to help Rouge states. Yet, in those countries, policymakers are trying to make room for digital resource ecosystems through special regulations that tell us something useful – Governments around the world may not be against blockchain or the underlying technology of cryptocurrency, but they are completely concerned about the anonymity of cryptocurrency and some potential illegal use. That said, about 35% of bitcoin is still mined in the United States (as of March 2022), and in February 2022 the Biden government passed an executive order “to ensure responsible development of digital resources” to simplify the crypto ecosystem in the United States. Countries like the United Arab Emirates, where the Dubai Emirates did so through the Dubai Virtual Asset Regulatory Authority – a specialized agency for controlling crypto and digital assets. The Dubai World Trade Center Authority (DWTCA) has also provided specific leadership.

In the Indian context, the regulatory vacuum persists, thus the role of trade associations and consumer organizations is to find mutually acceptable solutions that the VDA market can provide to maintain a sustainable engagement with key policy makers and other civil society stakeholders (NFTs, Metaverse, Crypto, etc.). ) Without blocking a space to work in India. The responsibility for providing education and facilities rests with the trade associations and related businesses. The Government of India must realize that in a digitally decentralized ecosystem with hyperconnectivity, unnatural barriers like omnipotent states will make videos accessible to Indians. It is always favorable that Indian customers choose to trade on India based exchanges under the stagnant KYC system instead of trading on the exchange with zero KYC and less or no control. In a regulatory relaxation, many foreign investors are sitting on the fence watching the regulatory winds in India.

The movement from consent to a voluntary market takes time. Since India seems to be the last, at least, one of the things that can be done is to use regtech rule, relevant protocols and global education to allow VDAs, including crypto exchanges, to trade in low risk products. Just like Industrial Special Economic Zones (SEZs), virtual digital assets (SEZs) may be approved in India and may see the light of day for enterprise use or business-to-business (B2B) transactions, as a preliminary step. If the Indian government fails to provide a rich environment for other chain technologies, including VDAs and cryptocurrencies, then the imposition of taxes on such assets is akin to the seventeenth century tax slave trade.

Storyboard Changes – Optimal Policy for Quick Acceptance.

Advocates of crypto and virtual digital assets advocates in India need to play a serious and far-sighted role in making VDA a successful policy story in India. So far the policy advocacy narrative has revolved primarily around crypto-exchanges and crypto-currencies as a medium of exchange or a resource (trade). The whole descriptive language and engagement strategy will revolve around a broader ecosystem to create the future network-effect of the chain ecosystem. Once VDAs and crypto-tipping points are acquired in India, the networks themselves will take care of the use of currency, just as we have seen in the case of electronic or retail mobile payments in India. When engaging with policymakers and users (enterprise and retail) with a specific focus on cryptocurrency, it may be an invisible and unreasonable approach.

The full description and advocacy strategy should rather focus on ecosystem level opportunities such as programmable business models, smart contracts, DFI, NFT, Metaverse, third generation digital laser technologies (DLT) and so on.

The focus of the crypto-ecosystem is already shifting from blockchain 1 and 2 to third generation blockchain, which means that past inefficiencies are taken care of by the system itself (including bitcoin, ether, etc.). The narrative itself among members of the crypto community is shifting from intensive evidence-based protocols to green proof-of-stack protocols to make transactions and systems more green, transparent, audible, and agile. Many companies around the world are entering the Metaverse ecosystem to deliver a unique user experience. Over the past few years, artists, investors and art lovers have been shifting to NFT. This is a tokenization where everyone is bullish.

In a recent event, many sectoral experts said^rd In a roundtable discussion on blockchain hosted by the European Business University (EBU), Luxembourg agreed that eventually multiple blockchain interactions would be observed and that the use of cryptocurrency P2P would automatically outlaw some black sheep weeds such as DLTs. .

Ultimately, the descriptive modeling for the VDA industry in India, driven by the Big Hair Odyssey Goal (BHAG), must be noble, far-sighted and optimistic, unraveling the potential through favorable public policy in India rather than statement and action with unintended consequences. Evaluation of subtlety and understanding of thought process is key. Consent may take some time to reach a favorable market in India, but once that is done, the transition for business and citizens will be huge.

(Neelam Rani is an Associate Professor and Jatinder Handu is a Scholar at IIM Shillong. The views expressed above are not necessarily those of the author and Financial Express.com).