Increasing Crypto adoption in India — A comprehensive approach
While the current regulatory climate in India does leave much to be desired as far as Cryptocurrency goes, one cannot imagine a world where Cryptocurrency is in the mainstream worldwide and India does not play a key role in it.
I thought I’d share my thoughts on what we need to see in order to increase Crypto adoption in India and make it a way of life, with the major caveat that there is soon a regulatory framework that allows this industry to operate and flourish here.
Most of the focus on Crypto in India thus far has been as a trading vehicle, a speculation mechanism and a way to get rich quick. I’m not being judgmental here. This was in fact why I personally got into Bitcoin. As Nick Szabo explains in his seminal article, shelling out, commodities go through various phases before they become widely accepted as currency. A speculation or collectibles phase is one of them. We are still early in Bitcoin’s evolution.
We do however need a reframing of the way we think about Cryptocurrency from a gambling or get-rich-quick scheme to a technology that will reconstruct the plumbing of the financial infrastructure of the world. In all likelihood, this is in fact probably going to be a get-rich-slowly scheme involving delayed gratification.
We also need to appreciate the effects that the HODLing of a deflationary currency like Bitcoin will have on Capital formation: The creation of new Industries comes from Investment which in turn comes from Savings, which in the case of a deflationary currency means an ever increasing purchasing number, the more gratification is delayed on a personal level.
Should India must adopt this in some form post-haste, she will have plenty of Ammo to make the investments necessary to become a $5 trillion economy by 2025, which is one of the stated goals of the BJP.
Friendly regulation — A prerequisite
While Indian Crypto Exchanges have done an admirable job of navigating through the RBI’s directive to Banks not to deal with them by inventing new mechanisms involving P2P trading (notably WazirX and others) it’s clear that most Indians are unwilling to jump through all of these hoops to get involved with Cryptocurrency, especially with the looming threat of the Government deeming even the holding of Cryptocurrency illegal. Mass adoption will not occur in the current environment.
The only way it can be achieved, is with the backdrop of a friendly regulatory framework. The rest of this post is going to assume this as a given, in order to open our minds and imagine the possibilities. The current realities are well captured by what the major Indian exchanges are already doing, and it is not one of the contentions of this article that we can do better than them given the current scenario.
Current problems — Onboarding, Liquidity, Efficiency, Portability
India already has a well developed system for Inter-bank and Intra-bank transfers for users, namely RTGS, NEFT and IMPS. Thus, people have come to expect financial transactions to be easy. The process for users to buy or sell Cryptocurrencies for Indian rupees must similarly be easy, seamless and hassle-free.
This preference is evidenced by the fact that despite innovations by exchanges in Deposit / Withdrawal functionality, the largest Crypto platform by volumes in India is still Localbitcoins.com, which features a Person-to-Person trading platform using Bank transfers.
Once a user decides to buy or sell Cryptocurrencies, they must be able to find a matching bid or ask on the other side of the trade. This is a critical requirement for mainstream adoption. This problem has not been solved in India. Take a look at the orderbook for any major exchange, even Localbitcoins. There isn’t the capacity in any of these platforms, for one, to say easily buy 50 BTC without a major logistical operation that is also sure to move the price.
Market makers fulfill the function of providing an Ask and Bid (willingness to buy and sell) 24/7 and are a key role in advanced markets and certainly bootstrapping a new market. This role is not being effectively filled as far as the Indian Crypto market goes.
Users, especially traders want to take advantage of arbitrage and market-making opportunities without necessarily moving back and forth between Cryptocurrency and Fiat. They make profits by taking advantage of these opportunities, which in turn brings markets back in line with where they should be and provides an efficient liquid market.
The Indian Crypto market needs a digital asset / token backed by the Indian rupee to make this possible. Being able to work with the Native currency is important and therefore US Dollar based USDT (Tether) will not fulfill the purpose. Then, there is of course an additional liquidity problem of having enough Tether traded on the Indian markets.
Users need the ability to move their Cryptocurrencies easily between exchanges and various services, perhaps to take advantage of De-fi (Decentralized finance) opportunities to lend or borrow Crypto and so on. They need to be able to do so without the friction of converting to Indian rupees to move money off an exchange. Again, an Indian rupee backed digital token will fulfill this requirement.
Thinking past Cryptocurrencies to the Real economy, an Indian rupee backed digital token with a large enough float, can not only fulfill any Crypto trading and liquidity needs, but also serve as the foundation for Commerce. Imagine if all payments to and from vendors, suppliers and customers through the entire supply chain was managed by transfers of digital tokens.
The efficiencies to be had would be enormous. Payments would be available 24/7, fast and trackable for the purposes of accounting / taxation. Smart contracts, Escrows and Micropayments become possible to further secure legal real-world contracts.
Indra Crypto Capital efforts
While we await further guidance from the Indian regulators, we are certainly not standing still. ICC is building solutions for the problems we listed above.
Our products, the Vajracoin digital asset, the IndraX exchange, the IndraDEX decentralized exchange, the Airavat wallet and the YieldWallet staking service form an important piece of our comprehensive approach to addressing these issues.
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