Digital Currency Conclave 2022 Day 2 Highlights: Amid Covid-19 uncertainties, Bitcoin, Ethereum, and other cryptocurrencies have garnered significant attention in India and across the world. Many see digital currencies (including private cryptocurrencies) as the future of finance. However, in the absence of regulations, cryptocurrencies are currently reduced to being a speculative asset class with extreme volatilities.
Watch: Digital Currency Conclave Day 2
On Day 1 of the Digital Currency Conclave organised by financialexpress.com on Tuesday (January 11, 2021), experts said the cryptocurrency sector offers a huge growth opportunity to India and positive regulations are required to exploit its full potential Experts said that good regulation and ease of doing business can help India become the biggest leader in the world in crypto, blockchain and Web3.
Experts also suggested that India can take inspiration from Dubai to nurture crypto and blockchain-based startups and companies in India. Dubai has been widely acknowledged as a global crypto hub with a supportive government, expat-friendly policy, infrastructure etc. A clear and friendly policy for investors and companies can help India accelerate much faster in the crypto sector.
While sharing that a complete ban on cryptocurrencies in India would not be in order now, Former Finance Secretary Subhash Chandra Garg said that India needs to formulate three separate laws to regulate the cryptocurrency sector comprehensively.
“I now believe that we should bring three different laws to regulate cryptocurrency in India. First, a digital rupee law, like we had earlier for coins and paper notes. Second, business laws to regulate smart contracts and third, a special law to deal with digital assets.”
Read Digital Currency Conclave Highlights
Digital Currency Conclave 2022 Highlights: Safe Guarding Finances
DeFi is here to stay. It is putting pressure on banks fintech to give something to customers, to innovate, says Deora.
Milind Deora says, “I am certainly concerned about investor protection,” says Milind Deora, adding, “Steer clear of cryptocurrencies”.
“Get out of cryptocurrencies till such a time SEBI or a Govt approved regulator starts regulating crypto. As we have seen in past, the ultimate loser is the investor.”
Milind Deora says, “Eventually what will happen is that craze around cryptocurrencies as an asset class will start to wane. Eventually, there will be a currency aspect to it. When Governments and Central Banks around the world start launching their own CBDCs, then those will be far more reliable forms of digital currency for somebody who wants to transact.
“Money will move in a digital form. And eventually, the private guys who are running private exchanges, even a currency as large as Bitcoin, will
eventually, be competing with Global currencies.
“Right now there is a craze around cryptocurrencies, not so much as originally envisioned by the founders of cryptocurrencies in 2008.
“Now its become an asset class…its like a bubble and when the bubble bursts then people will see cryptocurrencies for what they really is, i.e. an instrument of transaction. At that point, CBDCs will win over cryptocurrencies.”
Former Union MInister Milind Deora says, “My view is that cryptocurrencies are here to stay. They are not going to go away…I am glad that the Government’s position has come around from what seemed to be an outright ban, which could have pushed it underground to the dark web, now finding a way to regulate it.
The heart of cryptocurrencies is Blockchain. When we talk of the next generation of the internet, famously called Web 3.0 or the metaverse, essentially the internet will look different. It will be very decentralised. It will exist around some forms of tokens as a currency, which will be also a part of a larger umbrella, called decentralised finance.
“It is important for Government to create a regulatory framework that nurtures the Blockchain.”
Former RBI Governor Raghuram Rajan recently said over a period of time some currencies will die down.
In future, the systems will evolve. There are predictions that situations will change quite drastically by end of 2022. Smaller players will down. I am 100% sure that things will change when Government comes with the regulation or international regulations come. Chinese regulation is not going to impact more, says Gulshan Rai, Former National Cyber Coordinator, GoI.
The issue of authentication is very important in the digital world. It will become more important in future. Blockchain technology allows a good way of authentication. It is a good way of authentication and authorisation, says Gulshan Rai, Former National Cyber Coordinator, GoI, and Senior Advisor, Dua Consulting and Dua Associates.
Good clear regulation is the best possible thing for this industry to thrive. All we need is the right environment sprinkled with regulations, says Darshan.
“The second most common way people tend lose funds is by not securing the account themselves. Reusing passwords, having email with very weak password that is possibly recycled and not applying 2-factor authentication are some of the factors that increases chance of fraud,” says Darshan.
“Transactions are irreversible in crypto, primarily because once transactions are on chain, they are immutable, irreversible. Its on both the platforms as well as the customers that they follow best practices.”
Shilpa Mankar Ahluwalia, partner and head- Fintech, Shardul Amarchand Mangaldas and Co, says the real problem is the absence of regulation for crypto use cases and intermediaries
“What can really help in creating a safe space for investors is a regulatory framework that not only addresses use cases of crypto that is allowed but is able to operate licenced sort of environment and protect consumers.”
“If you have a market where crypto can only be traded via licenced exchanges, that’s one big step…
“Consumer awareness is also required.”
“We are expecting regulation from the government for crypto. But for other parts, like behaviour inside the Metaverse,we are all a little worried about. Because there is going to be freedom of speech inside metaverse. With multiple avatars, you cannot have profanity filter for speech. So that’s something that worries us, says Pushpak Kypuram, CEO, NextMeet
Saurabh Gupta, co-founder, Tamasha says: “Gaming has changed a lot in the past year. Currently, it is not just gaming but a social network…Even if you go on PUBG, it is not just about gaming, it is about interacting with people, doing missions together. I would say PUBG is better tinder than actual tinder. You can actually know how your partner behaves in different situations…”
“Games like PUBG were built-in Web 2.0. The next set of games would be more decentralised. In projects like Mana, people can have true ownership of land, they can do multiple stuff around that. In Axie gaming, you can grow your character and sell in the real market.
“As the technology evolves, people will be spending more time in the virtual space.”
India today sends $90 billion dollars overseas for a variety of purposes. Today, the experience the customer goes through is very difficult. Blockchain can help in global money transfers easy and cost-effective, experts say.
“UPI changed the way we send money to anyone in India. Blockchain can enable the creation of UPI of the world,” says Navin Gupta, MD, South Asia and MENA, Ripple.
Banks biggest fear that they will lose control over money is wrong, experts say.
Sandeep Nailwal of Polygon says, “Biggest misfortune of Indian ecosystem and global ecosystem also that when we say crypto, we think cryptocurrency. I think the full form of crypto is cryptography, cryptography-based technologies.
“If you go to the top projects in the crypto space, you will find Bitcoin and probably a few more like old privacy cryptocurrencies built as currency. Everything else, like all other big protocols in today’s world, are either stable coins or smart contracting platforms, which are not currencies…they are not built to be money, They are built to be providing the assets which provide the game-theoretical and social-economic consensus benefits…. 99% of crypto projects are not built to be currencies.”
Introduction of CBDC is going to be a slow process. There are two models currently – direct and hybrid. Most central banks across the banks are looking at a hybrid model, says Suvir Davda.
“CBDC is no longer about eliminating cash but replacing cash with equal and digital funds. In the current digital payments, money is stored in banks. Individuals don’t have a store of value, can’t transfer without going through intermediaries.
“Central bank-backed CBDC would make it really conceptually eliminate the need to have any physical paper at all, which is not possible today with digital payments,” says Bipin Preet Singh, Founder and CEO, MobiKwik.
“Our CBDC use cases would be different from the rest of the world. On wholesale and retail side, CBDCs would add value, Suvir Davda, Director, Corporate ales, Markets & Securities Services, HSBC India.
Vani Kola, MD Kalaari Capital, says the vision of a global fully decentralised financial system may not be practical
“…But now, because of this tough stand against crypto, I am seeeing a huge amount of brain drain out of India to places. Technically, all the bigger projects in the Indian ecosystem are moving to place like Singapore, Dubai and some of the places where regulations are friendly. And this will only accelerate if India doesn’t provide them at least like a snadbox kind of environment where startups can thrive,” says Sandeep Nailwal.
“Government has these two options – Either make India a laggard or take this technology as this technology which can actually bring back India to its glory days. India is already the software factory of the world. Even with so many restrictions, we have the largest number of engineers in the blockchain space. You would find India is probably on the number 1 or number 2 spot, with so many restrictions. Imagine if there is actually a promotion of the technology in the country. then we would have become a superpower in this technology…,” says Sandeep Nailwal, co-founder, Polygon.
“India missed the huge bus during the internet era of creating high-value companies out of the country. Today we have talent, technology, and capital. We have probably the best opportunity in the best place to create very high-value companies from India for the who world.
“We do agree that there are risks. But these are not new risks. Risks are there in every financial system today. Yes, the operating past is different today. But the risks are the same. The mitigating measures are already identified, already tested…,” says Navin Surya, Chairman, Fintech Convergence Council.
“We cannot ban these technologies. The only sensible thing to do is to provide well-understood fair-playing field to everybody,” says Emin Gur Sirer, Founder and CEO, Ava labs.
Emin Gur Sirer, Founder and CEO, Ava labs, says: “Digital currencies are here to stay. They are not going anywehre. The legislature trying to crackdown on digital currencies have generally not fared well.”
Piyush Gupta: National boundaries won’t matter. Tons of opportunities would arise. A lot of new sets of fancy job titles will come.
Parv Prabhakar: The possibilities in this space are as big as you imagination can go.
Jeetesh Tipe: Cryptocurrency space is growing faster than the internet. The space is huge and there is a huge opportunity for India.
Romit Mehta: Crypto will not be associated just with token trading but also with institutional and iconic companies. Polygon may be the first of it, and I think there will be many many more in future.
“Web3 is an open book, a huge opportunity for India to find its own niche. All the requirements for creating such a niche is already available”.”
Jeetesh Tipe, Founder and CIO, MintingM, says, “Overall crypto market is at around $2 trillion. And within that there are two parts – Build and Money (Investors). There is a multi-trillion opportunity right ahead of us which can be disrupted…I think good regulation from India and ease of doing business, can help the country become the biggest leader of the world in this field. We have a tremendous opportunity in front of us.”
Romit Mehta, Investor, Lightspeed and Piyush Gupta of Polytrade say India can take inspriation from the Dubai model. Dubai has been widely acknowledged as a global crypto hub with supportive government, expat-friendly policy, infrastructure etc.
A clear and friendly policy for investors and companies can help India accelerate much faster in the crypto sector. “Blockchain is sureshot way of achieveing the $5 trillion economy target of PM Modi,” says Gupta.
Blockchain and Emerging Tech Evangelist Sharat Chandra, who is moderating the session on “Opportunities for India in the global crypto context” suggests India can model that Gift City on the lines of Dubai’s DMCC Crypto Centre.
“NFTs are really easy to onboard mass adoption for the fact that there is no financial background required… NFTs are already driving mass adoption of crypto and it will continue to do so,” says Zach Burks, Founder, Mintable
According to Swapnil Pawar, founder, ASQI, says the absence of legal robustness and mechanism to establish identity are two missing links coming in the way of popularising the conversion of physical assets into NFTs.
Identity is the biggest missing link. Convention crypto-world has grown with an attitude of being anonymous. But it won’t work when it comes to real physical assets.
Also, “Most of the NFTs today are good faith assets,” Pawar says.
“Metaverse is here to stay. A lot of innovation is happening in this space. But that won’t replace the physical world,” says Amit Jaju
Toshendra Singh says the Gas fee is something no user can bypass. Adding cryptocurrency to wallet is also an issue faced by users, which leave many confused.
Ethereum is very congested. The gas fee goes up because of congestion.
Visakha Singh of WazirX NFT Market Place says you need to pay the Gas fee to authenticate the transaction. Even if the Gas fee is high, you get access to a very large community, hence chances of selling at a higher price are more.
“The authenticity of NFT is important from the collectors’ point of view. We at WazirX NFT Marketplace have literally handpicked our creators…It is important for us to do this sort of gatekeeping to build the culture, because we are in such a nascent stage,” Vishakha Singh, VP, WazirX NFT Marketplace.
Amit Jaju, Senior MD, Ankura Consulting, says: “Duplicity is a problem because any digital asset is intangible and can easily be replicated. So that’s where is a big challenge now. The entire ecosystem is not linked properly, it is still evolving…
“Right now, the person, who is buying a high-value NFT, should be aware of the process. In most of the cases of high-value transactions, which I am seeing, there is an offline contract as well, outside the blockchain parties are signing to kind of safeguard themselves.
“I cannot say there is no foolproof solution right now but there are certain checks and balances that can be built-in.”
Toshendra Sharma says, “Different blockchains have different standards. But broadly, there are two standards available for NFTs. One is ERC 721 and another is ERC 1155. There are two different standards as per the nature of NFTs to be minted.
“ERC721 is used where one NFT contains just one copy item. It is more meaningful for paintings or physical assets. ERC1155 where one NFT can have multiple copies of it. It can be an event ticket, it can be an experience ticket or it can be an opportunity, a TV ad slot…ERC1155 also gives a chance to fractionalize certain assets. For example, you can have one painting and you can mint 100 copies of it, and whoever owns one copy will be considered as a one per cent owner of that particular asset.”
Toshendra Sharma, Founder and CEO, NFTically, says one needs to have 3-4 things in hands for creating an NFT:
First, a digital asset that can exist in your laptop or your phone.
Second, cryptocurrency or Ethereum wallet. Metamask is the most commonly used wallet.
Third, some small amount of cryptom depending on which platform you are using. For eg, ETH for Ethereum, Matic for Polygon.
Fourth, an NFT marketplace like OpenSea, Rarible, WazirX, NFTically as well.
“The process of minting an NFT is very straight forward, like filling a small Google form, where you connect your wallet first and then create a collection. Once you have created the collection, you have to create an NFT inside the collection. Once you have created an NFT inside the collection, you have to upload the digital file which you are minting. You have to describe title, description, add some properties…and then you have complete the transaction,” says Sharma.
“The first thing is to really understand that it is based on a completely different philosophy from the existing financial system. So this is a sort of asset class where you are the bank, you own your keys and you bank your assets. So all risks fall on the consumer.
“This is a global asset, which trades 24×7 there is no regulator…so there is lot of inherent volatility and it is going to stay.
Experts agree that contribution of crypto in one’s portfolio should be 1-5%. They unanimously say that don’t invest in crypto unless you understand it.
Jalak Jobanputra, Founder and managing Partners, Future Perfect Ventures: “You have to have a longer-term time horizon. At least 1% of ones’ portfolio should be in crypto, as it is the future…”
Avinash Shekhar, Co-CEO, ZEbPay: “We should be looking at a very small part of the portfolio in crypto. It could be 1%, 2% or maybe 5% initially. Then one should try to understand the technology and crypto markets to develop and understanding.”
Tanvi Ratna, CEO, Policy 4.0: “Crypto in itself has diversified in terms of types assets. For people who are in any area of technology, they will find some basket of tokens in which they can invest…I would say invest in what you know. I would not no put a number on how much one should invest.”
Shailesh Lakhani, MD, Sequoia Capital: “You should do tons of research… I would say 5% is the high-level number, stick to it in mainstream assets, then look for others after doing lots of research….”
Manisha Kapoor, Secretary General, ASCI: I think people should understand that this is a new kind of investment. Certain risks are there. Therefore in any new kind of investment, one should invest only that amount they can afford to lose.
Polytrade CEO Piyush Gupta says returns for investors on Polytrade would not be affected by the ups and downs of crypto markets.
“Depositor in banks are not getting anything out of it (their deposits). Our idea is to remove intermediaries and give returns to depositors.”
“We are trying to bring trade finance product to both lenders and borrowers.”
“As per World Economic Forum, there is a $1.8 trillion gap in trade finance space. When it comes to SMEs, 60% of trade finance requests are rejected. Polytrade is trying to disrupt this space by using this gap so that we can provide as much as liquidity needs to SMEs.”
“I now believe that we should bring three different laws to regulate cryptocurrency in India:
“First, Digital Rupee law, like we had earlier for coins and paper notes. Time has come for digital currency to be issued as the currency for the country. This law can be used to ban private cryptocurrencies, except for some stable coins and in-platform cryptocurrencies.
“Second, Business laws to regulate smart contracts, as the current Contract Act does not deal with smart contracts. This will bring smart contract businesses under regulation.
“Third, we have a special law to deal with securities and contracts. Likewise we should have special law to deal with digital assets.
“if we bring these three laws, we will be able to deal with this issue comprehensively…we will be able to give a fillip to this technology which is going to be very useful.”
– SC Garg
“My sense is that the Government and the Reserve Bank have not materially moved from the original concern which they had – of the cryptocurrencies being a competitor to the rupee.
“The Government is getting sensitive to the asset aspects. Cryptocurrencies are not just currencies. They are much more than that. Therefore a complete ban would not be in order,” says SC Garg.
Subhash Chandra Garg says: “My sense is that the Government and the Reserve Bank have not materially moved from the original concern they had – of the cryptocurrencies being a competitor to rupee.
“The Government is getting sensitive to the asset aspect of cryptocurrencies… Cryptocurrencies are not just currencies but much more than that. Therefore a complete ban would not be in order.
“My sense is that it has not been figured out fully how to deal with cryptocurrencies. The solutions to deal with that are not clear to the Government.
“The Government should come up with a most comprehensive type of bill…I think Govt will not be able to prevent stablecoins use or in-platform use of crypto assets.
“I think we should wait for the Bill to come.”
“My sense is that the decentralised mode is going to be quite competitive, maybe more efficient and certainly it solves the issue of trust much more, because you are not subject to any centralised controllers. But it does not mean that it is going to completely vanquish the centralised technology and systems. I think both of them can survive and improve. The bulk of the payments and businesses might continue to be centralised but the growth would come phenomenally from Decentralised technologies…,” says Subhash Chandra Garg.
Stablecoins have taken away discrepancies with fiat currencies international transfers. And this is likely to grow
While talking of cryptocurrencies, three use-cases need to be dealt with – Bitcoin as general currency, in-platform currencies and stablecoins for international transfers, says Garg.
“The Cryptocurrency phenomenon started with Bitcoin, which was supposed to replace fiat currencies. Problems in international payments and the governments’ total control over fiat currencies were two reasons for Bitcoin argued by its designers,” says Subhash Chandra Garg
Subhash Chandra Garg, Former Finance Secretary, to kickstart the Digital Currency Conclave with the keynote address on Digital currency and its role in Modern India at 10 am.