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India happens to be at a sweet spot of driving growth and innovation by landing a robust Digital Currency Bill this year. In spite of the several rumors on a potential ban on crypto in India, there are multiple use cases that could be considered by the policymakers who understand the true potential of leveraging crypto and its impact on our economy.
Keeping in mind that our nation’s success in the past three decades has come from ITeS-based solutions, if India is aiming to reach a $5 trillion economy, we cannot ignore the $1.7 trillion market that exists for cryptocurrencies. A forward-looking crypto policy can have a significant impact on improving our overall financial infrastructure, help safeguard national security, deter financial frauds, strengthen our monetary policy, attract international capital, create more job opportunities, and retain our tech talent to accelerate technological development, thereby driving the nation towards becoming a global powerhouse.
We will need to prepare for the future and make adequate accommodations to safeguard our global financial positioning. We also have to become ‘Atmanirbhar’ and reduce our dependency in situations like the 2008 financial crisis or the 2020 COVID-19 crash. Cyberwarfare also poses a sizable threat in our rapidly digitizing country. A decentralized financial platform could help India resolve such issues and have an added advantage as these platform networks will not be blocked by any single state or country in times of national distress or conflict. The other advantage here would be that if we could create our own social networks on Ethereum, it would help build a decentralized ecosystem, which has its own positive effects.
The use of Bitcoin and Ethereum could help strengthen India’s monetary policy and bridge the gap areas that exist in the current fintech landscape. Crypto’s distributed ledger technology permits faster, direct transactions by the users and also helps keep track of every digital transaction, which is far more advanced and effective than existing protocols such as SWIFT. Secondly, Bitcoin can be used as an asset that sovereigns use to complement their national digital currencies. It also reduces the burden on regulators by allowing them to write programs that certify that financial actors are in complete compliance with the regulators. We can avoid instances such as mortgage fraud and other fraudulent activities.
In other words, the evolution of Bitcoin and cryptocurrencies holds economic importance similar to the internet in the 90s. The second unique crypto called Ethereum, which enabled smart contracts, gave birth to an entire sector called decentralized finance (DeFi). DeFi is to build a multi-faceted financial system that boosts the functionality and helps improve the legacy or the traditional financial system. DeFi alone has created disruptions in the fintech space and, in the future, DeFi neo banks will play a pivotal role to successfully bridge the gap between fintech and DeFi to attract new customers. Therefore, Blockchain-based accounting holds the potential to empower regulators to monitor their activities and conduct risk management seamlessly.
We are all aware of the devastating impact that COVID-19 has had on the Indian economy and the global market at large. Despite this, crypto has been generating jobs across a variety of functions in India and abroad. As of today, over 300 start-ups have generated tens of thousands of jobs and hundred-millions of dollars in revenue and taxes. The ongoing development will inevitably lead to tech talent being engaged in India. Indian youth seeks challenging opportunities to work on projects which are internationally competitive and also help support improving our tech infrastructure.
In March 2020, two major events occurred which have boosted crypto adoption in India – i.e. the Supreme Court’s historic verdict and the pandemic. WazirX completely caters to the Indian market and has seen tremendous growth since then. Several Indians have lost jobs, and this has led them to invest in cryptocurrency to earn a side income by becoming traders, technical analysts, or crypto influencers. Globally, many institutional investors, including hedge funds in the US along with the giants like Square and PayPal, are entering into crypto and are in a buying mode. This has also given a push to Bitcoin adoption.
The latest buzz in the crypto space is using tech to own and sell digital arts by NFTs, i.e Non-Fungible Tokens. NFTs are digital assets that are based on the Etherum blockchain. The approach creates a unique token, which has an unreplicable but transferrable unique identity. An NFT could be tweets, a mix of collectibles and items, domain names, tickets, or anything else that can qualify as a digital asset. Owning an NFT is perhaps the most secure mode to invest as the whole technology is based on the Ethereum network, which is a blockchain that acts as smart contracts. This may become a great tool for independent artists to archive and own their digital IDs and use the platform as a digital payment gateway for royalty.
A positive response from the Government of India will help boost India’s fintech infrastructure and promote our digital India mission. Interesting times are ahead of us!
(By Nischal Shetty,CEO, WazirX)