With a legal framework for cryptocurrencies in India expected to be finalised by the next general Budget, Business Today Television caught up with Sumit Gupta, co-founder and CEO of Coin DCX, India’s first unicorn crypto exchange to discuss the proposed move and the likely impact on this burgeoning sector.
BT: Given that work on a legal framework for cryptocurrencies is underway, what would be an ideal approach for the government to consider?
Sumit Gupta : This is a very positive and welcome move by the government, which was pending since long. We, as industry partners were trying to have this discussion with the government, and policy makers in order to bridge the gap so as to regulate crypto as an asset class. Now, I think that after several discussions there has been more clarity in the government around crypto as an emerging asset class, and the thought of moving away from banning crypto. We should allow legitimate players to operate with full transparency.
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BT: From 2018, when a draft Bill proposed to ban cryptocurrencies, to recently when government officials have indicated that a ban may not be feasible -- has there been a change that you have noticed in the thinking of decision makers?
Sumit Gupta: Absolutely. There is a clear shift in terms of how [the] government was thinking about it earlier and lot of it is driven by lot of positive movements happening outside India. A lot of progressive nations have adopted crypto and have understood that it is very difficult to ban the technology. In fact, instead of fighting against technology, it's important to regulate, understand and ensure that investors are protected.
Earlier, crypto was mostly seen as a payment system but it is actually not. It is not a currency; it is more like an asset class. The confusion which was earlier there has now gone away and now government is open to the idea of adopting crypto. This is clear from the traction that CoinDCX has seen. Many investors are keen to learn about it, and are waiting on the fence to get a nod from the government.
BT: What is the current global framework on cryptocurrencies that is most relevant for India to consider?
Sumit Gupta: India should not think of this as a currency, because currently it's not being used as a part of payments system. But if anyone wants to invest into Bitcoin or crypto assets, they should be allowed to do that just like gold or silver investment. A similar framework can be applied. India should charge proper taxes so that government revenues can also go up -- there is a huge revenue potential. Many of these investors have got significant profits from crypto investing. Government should lay out a clear tax guideline, so that all of that tax goes to it and it becomes a revenue stream.
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BT : Should India treat cryptocurrencies as an asset class?
Sumit Gupta: We should strongly consider cryptocurrency as an asset class because this industry is rapidly evolving.
BT: What safeguards would you propose to be introduced in the law?
Sumit Gupta: To highlight some of the points here, I think all the exchanges are self-regulated. We follow all the guidelines. One is to work with the industry players, to set up properly laid out guidelines and regulate exchanges. Once exchanges are regulated, you can control 95 per cent of activities and there is full transparency. All of the data and number of people trading could be accessed. This is the first step and again this is not an easy thing to do. It should be a phased approach, regulate the exchanges and work with them in building the regulatory framework. And then, build the ecosystem around it.
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BT: Who should regulate cryptocurrencies in India? Should it be RBI or SEBI or should it have some elements of self-regulation?
Sumit Gupta: Since crypto is such a fast-growing industry, and it's very difficult to put hard boundaries around it. If you do, then innovation will be hampered. The right way to approach this is to have a very fluid framework and which works in the direction of consumer protection and lay out specific guidelines. Bad actors should not be a part of the crypto ecosystem. All the players who are essentially part of this should be under government eyesight so that only legit players are operating in the country. This is to ensure that investor money is protected. It's important to keep it fluid also.
You can’t just solve all the problems right away since the space is evolving, globally. For example, there is a travel rule that will determine where the crypto is going from -- the source as well as the destination. You can track all that, just how it happens in the bank transactions. If you are working closely with the players, all of those questions can be answered and India will continue to innovate without putting any harsh restrictions. The moment you put harsh restrictions, it will hurt the innovation. Take gradual steps and create a conducive environment for crypto players
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BT: Do you think the government should undertake public consultations before finalising the law?
Sumit Gupta: Public consultation should be there because there are 50 million investors and 500-plus start-ups and lakhs of people who are directly or indirectly associated with the industry and this industry is hiring aggressively. Billions of dollars are coming in, and another billion dollars lying outside waiting to enter into India.
Massive opportunity and the government should do a public consultation, at least industry consultation since that has not happened in the past and right now [the] industry is trying to reach out to the government and discuss and this should happen pro-actively on a public forum so that we take the right steps. The objective is the same, we would want to do things that benefit the nation, and that public, industry consultation will help us to build robust regulatory framework which benefits the industry a lot.
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BT: Please explain the phenomenon of non-fungible tokens (NFTs) - even Bollywood stars are issuing them.
Sumit Gupta: A lot of people have realised the importance of their network and have developed creativity in them. With NFTs along, whether it is Bollywood stars or artist out there, they would want to showcase and there is no broker in between so there are various ways. It will have its own cycle and broadly if you look at it, its [going to] open up a whole new economy built on block chain.
Earlier, block chain decentralised things but, in creator economy, there have been various brokers which can be eliminated now. It builds a new economy leveraging block chain technology. I am definitely bullish about this, and globally we are seeing lot of interest. The clearly laid out regulation is a must, you will have economy growing way faster and it supports the ecosystem.
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