The State of Web3 Regulations
By Anju B Nair, Sr. Technical Content Writer, Kerala Blockchain Academy
With peer-to-peer and decentralized features that move data control to users and eventually do away with platform / third-party intermediation, Web3 is a new call for industries today. In essence, Web3 leverages blockchains, cryptocurrencies, and NFTs to return ownership and authority to the consumers. Read on Web3 and its Current Trends to Watch.
The Current State
Web 3 technology is still in its infancy stage, and with the ownership moving to the users, there is a continuous impetus on the framework of laws to regulate the industry to ensure the users are technologically aware and protected from any financial instabilities and data-related frauds.
Despite the global uptake of blockchain goods and services, many countries, including India, are still hampered by the absence of effective regulations in the market. For the same reason, many businesses have relocated their operations to more cryptocurrency-friendly cities like Dubai and Singapore due to the lack of clarity surrounding how cutting-edge blockchain goods may operate in the markets. In fact, according to the 2022 NASSCOM research , 60% of Indian Web3 firms were registered outside of the nation yet engaged local tech workers. One Indian state ( Telangana) has taken the first move towards establishing a supportive regulatory environment for experimenting with blockchain apps. We will read them as we progress.
Global Take on Web3 Regulations
In the past two to three years, major countries with sophisticated economies have set the groundwork for legislation that will fuel innovation and safeguard consumers. While other nations had been working on the acts for a long time before their adoption, India has yet to make any major headway or provide any regulatory guidance. These nations are now supporting start-ups that are creative yet policy-concerned and giving them a supportive environment in which to develop their ideas for the globe.
The Indian Context
India’s inherent advantages are talent, economic growth, and demographics. However, despite the exponential growth of the Indian technological talent pool, the exodus of companies and founders to other nations is causing a brain drain in India and a loss of excellent mentors and talent in the Web3 field. Although the number of startups in the nation has increased significantly in recent years, lack of political and regulatory clarity is the top issue for company entrepreneurs. India intends to introduce the Digital Rupee, its official central bank digital currency (CBDC), in FY2023, but nothing is known about how this would affect the private cryptocurrency market. As a result, creators and innovators are losing confidence and ultimately leaving the nation as a result of the uncertainty and lack of progress updates on this issue.
The blissful part is India’s 2% of the population are active crypto users and ranks 2nd after the US in terms of the user base. With millennials and Gen Z representing the majority of cryptocurrency investors and Web3 people utilising play-to-earn models and NFT assets, this base will undoubtedly increase. This would be a fantastic opportunity for India to develop a regulatory framework so startup enterprises can be retained, and India can also be established as one of the largest Web3 consumer markets.
India’s First Web3 Regulatory Initiative
Telangana state recently introduced a Web3 Regulatory Sandbox  for chosen blockchain businesses to test their ideas in a regulated setting. Additionally, under the initiative, the businesses may get assistance from mentorship, legal compliance, and teamwork with important ecosystem players.
Telangana’s Web3 regulatory sandbox is the first of its kind in India because it is the only government programme that grants authorization, legal compliance, security, and authentication for disruptive blockchain projects that would otherwise struggle due to a lack of clarity regarding the country’s current crypto regulations. Working in the safe environment of the sandbox with important stakeholders like banks might aid companies/startups in gaining more knowledge prior to entering the market. The Web3 regulatory sandbox is the brainchild of Jayesh Ranjan, Principal Secretary, Industries and Commerce (I&C) and Information Technology (IT), Telangana, to specially address the brain drain of Web3 founders leaving India for a single reason of regulatory clarity.
Steps To Be Taken Next
Currently, trading operations for cryptocurrencies and digital assets are being carried out regardless of national boundaries.
India should now consider strategies to inform and warn cryptocurrency holders about hacking and cyberattacks as the number of users of the currency rises in the nation. The nation should consider how crypto asset issuers may likewise be held accountable and make sure that they are held accountable in the event of a loss. Regulation and regulatory frameworks will expose and discredit any Ponzi scheme operators who pose as crypto assets, hence minimising fraud and hacks. A timely progress update on the policy development would be a tentative relief and might nurture the faith in crypto users and Web3 startups. More Telengana-model initiatives can place India as a safer, fertile ground for Web3 mushrooms.
What do you say? Do comment with your opinion, we eagerly want to know.