Why crypto integration bodes well for the future of finance in India

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By Sumit Gupta, Co-Founder and CEO of CoinDCX

India is at the dawn of an economic transformation, which will finally unleash all the technological potential of a country that has been waiting for its moment in the spotlight since the computer boom of the 90s. Driven by the arrival of Web 3.0, of many companies in India are evaluating how decentralized technologies, such as blockchain and crypto, will shape the future of finance. However, this technology also has the ability to impact a much larger group, bringing a new level of financial inclusion that will allow everyone to engage in the growing economy. The key is to provide a regulatory framework that balances protection and flexibility.

Now is the time to act. Crypto and its underlying blockchain systems are no longer a peripheral technology but the foundations of a new decentralized future. Last month, the global crypto market cap topped $ 3 trillion for the first time, with several crypto reaching new all-time highs. The rise of Memecoins such as Dogecoin, Shiba Inu, and Squid Game not only reflects the rapid evolution of the system, but also the diverse ecosystem of creators and traders beyond professional crypto investors.

As the industry evolves, the range of assets makes crypto more accessible to institutional investors. In October, the first U.S. bitcoin futures exchange-traded fund (ETF) was launched, giving investors the ability to buy and sell assets outside of cryptocurrency exchanges. Similar efforts in Singapore to launch the first Bitcoin spot ETF reflect a growing desire for passive exposure to bitcoin. Through projects like these, crypto is able to bridge the gap between traditional finance and the emerging DeFi space, attracting even more investors on board.

Growing adoption and legitimacy

Interest in crypto has spread beyond the realm of blockchain experts and investors. Growing awareness and accessibility has resulted in 880% global adoption in 2021, with P2P platforms being the primary driver of cryptocurrency use in emerging markets. India, with its strong educational focus on science and technology, has been perfectly placed to ride this wave. According to the Global Cryptocurrency Adoption Index 2021, India has the second highest level of cryptocurrency adoption by ordinary people, with an emphasis on transactions and individual savings, rather than on trade and speculation.

With this popular interest came the growth of the industry. A thriving Indian crypto sector is growing to support this massive adoption, with two Indian startups reaching the crypto unicorn kingdom this year – CoinDCX and CoinSwitch Kuber. Many Indian developers are forging ahead in the crypto space, focusing on harnessing decentralized technology to enable financial inclusion that will drive India’s growing innovation economy.

The benefits of hosting crypto

Decentralization has the potential to transform financial systems, allowing for greater financial inclusion and greater empowerment. As an investable asset class, crypto is a welcome and viable alternative to traditional financial classes such as gold, allowing investors to play a more direct role in their wealth management. Its digital nature means that it is more transportable and divisible, and more applicable as a currency. These qualities lend themselves well to raising capital, enabling more efficient capital flows and better access to a broader investor base.

The transparency of the blockchain system also streamlines the issuance, transfer and management of traditional assets. Crypto therefore has enormous potential as a medium to facilitate cross-border payments, with significant speed and cost advantages over existing incumbents. Countries like Singapore are testing ways to enable payment clearing and settlement using blockchain technology, completing end-to-end settlements in minutes, much faster than traditional methods taking days. Such systems have the potential to revolutionize commerce between countries with a favorable attitude towards crypto.

In short, the integration of crypto offers a multitude of advantages. For developed economies, crypto represents a greater choice for consumers, with cheaper and more efficient means of transaction. For emerging economies, crypto allows countries to hedge against currency devaluation, while democratizing access to financial services through decentralized platforms.

Regulatory clarity is the key

Regulators around the world are weighing the benefits of hosting crypto against the need to protect consumers and economies from potential risks.

In India, lawmakers are now examining the issue of how to make sure crypto has the right checks and balances to avoid malpractice, but enough freedom to allow the industry to thrive. In a positive move, the government is moving away from signs that it intends to implement an outright ban, and towards a more collaborative approach, working with key stakeholders in the crypto ecosystem to understand how to best define and regulate new technology.

To be successful, the regulatory approach must see the entire crypto ecosystem from a holistic perspective, with malleable approaches that adapt to an ever-changing digital world. First, the legal status of cryptocurrencies must be carefully considered to counter any threat of malpractice. Particular attention should be paid to the cessation of cryptocurrency-related crime and tax evasion, as well as regulations aimed at suppressing the use of crypto by unions as a means of money laundering and financing of terrorism. This will bring credibility and security to crypto in India and encourage institutional trust. Stablecoin regulations can also be put in place to preserve the integrity of the monetary system and financial markets, protecting the existing system while opening the door to innovative measures to link traditional finance to DeFi.

At the same time, regulations focused on consumer protection will allow millions of Indians interested in crypto to use properly adopted investment vehicles. The government and stakeholders should also work together to ensure a huge educational effort to develop crypto-literacy, making the benefits of crypto accessible to a much broader base. In addition, major industry players should be aware of the need to provide adequate remedies for victims of cryptocurrency in order to maintain a level of oversight and accountability.

To be successful in a decentralized era, we need to approach crypto with Indian entrepreneurship. We should embrace the new technology around us and use it as a tool for growth, instead of avoiding it. We have the capabilities to innovate quickly and grow the economy in a Web 3.0 world, we just need to make sure we’re all working towards the same vision. All stakeholders – from government and industry experts to the average Indian with web access – need to work together in a collaborative, not a combative way. Only then can India take its place as a digital leader on the world stage and bring the benefits of crypto to everyone.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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