“As an industry, we are pushing for regulations, we want to be regulated so that the good activities can prosper while keeping bad actors at bay,” says Nischal Shetty, Founder & CEO, WazirX.
What are you seeing for crypto in 2022? We will of course be awaiting the crypto legislation to find out who will be the regulator – SEBI, RBI or a mix of the two?
I think 2022 is going to extend on all the work that was done in 2021 and regulations are right at the top. I believe India will go deeper into the old regulatory environment around crypto and this is going to be true globally. The talk around CBDC
which is the Central Bank Digital Currency, will see more movement. A lot more countries are going to get into CBDC and in 2022 it is going to be a race about which country launches it faster than the others.
There has been a lot of buzz around other aspects of crypto like the Metaverse. But there has not been enough development and so we will see some really good products emerging in the metaverse space and NFTs are going to try to find the secondary markets.
In 2021, everyone was in the NFT buying spree and now these NFTs want to find secondary buyers to avail liquidity. That is going to be the deciding factor for NFTs this year. This year is going to be really crucial for cryptos to go to the next level, in terms of adoption and stability. We have about 150 million people around the world in cryptos today and if we see the same kind of tailwinds as in 2021, this number is going to 300 to 400 million people this year.
There is divided opinion on crypto currencies and assets. One side feels that people are getting into it without proper understanding of the medium and may end up making losses. Others feel that policy and old thinking cannot keep it back. Do you think 2022 will be the year when people will make losses?
When it comes to investments, there are always diverse opinions. Whoever is getting into investing not just in crypto but anywhere else, has to understand that both loss and gains are possible. The bigger question is whether at the technological level, crypto is doing what it is supposed to do and the kind of innovation and adoption that we are seeing is making it clear that it is doing that.
Large and small countries are discussing regulation. It was really apparent that if this was not really a good technology, many countries would have banned it by now. But no large country has banned it and it has been spoken about in the regulatory direction everywhere. We know for a fact that the US is discussing deeply into how to regulate cryptos. Now what is going to be crucial is to see how regulations come up.
It is a spectrum and I do not believe that a ban is something that any country would want to get into in this technology where it can really compete and grow. There is a $2.5 trillion market out there and it is not going to wait for any nation to come on board. It is growing. The question for every nation is do they want to participate and get a share of this pie? I believe that India is going to take that decision to get a share of the pie because we are a fast growing nation. I believe we will have a trillion dollars worth of market cap in crypto in India if we do that sooner than later.
What is the best case scenario and worst case scenario in terms of regulations which are expected next year?
Everyone is in alignment on the payment use case of crypto in India and India happens to be one of those countries which does not need crypto for the regular payments. That is something that everyone is aligned on – even the industry and everyone around who is working in crypto.
The other aspect is to build crypto applications to run crypto related products. One needs the respective tokens and coins of those particular block sales that one is going to build applications on and this is where as an industry we are looking for regulatory clarity, a framework.
What is happening today is if anyone wants to build a crypto startup in India, they are really worried about what directions regulations would go. So we are seeing a lot of companies being built abroad, run by Indians. The moment India can bring in clarity, we will see a lot of start-ups emerging in the country at a faster pace. I expect clarity on the non-payment use cases. In fact, in India the growth has been purely non-payment. One does not hear of applications which are promoting crypto as a payment instrument in India. It is happening in other countries but it is not happening in India because crypto payments are expensive compared to UPI. So, in the non-payment use cases, we have to look at how regulations come in that direction and the indices. I am expecting some clarity which will allow us to build more companies and grow this sector in India.
By delaying any kind of regulation and allowing the functioning, the government has in a sense given the signal that it is okay right now. How are crypto exchanges like yourself looking at investor education? Will you spend time, money and effort next year telling people that is not the case?
We have been doing that and focusing on investor education to a large extent. We do it in two ways where we ourselves push for education and also partner with start-ups and any of the publications that want to work on crypto education. It is going to be an ongoing thing for all of us in the industry.
I think right now a lot of education is happening in crypto. I do not think India has seen the kind of crypto education that has happened in the last 12 months. Crypto is one of the most spoken about topics and this confusion is bound to be there because it is a new technology. We cannot be too harsh on the government and expect it to regulate this overnight because it is changing every other month as new concepts are emerging every few months.
If we prematurely regulate this sector, then we will have regulations which will get outdated by the time it comes up. What is probably important is some guidelines which will ensure that bad actors cannot take advantage of the fact that India is still figuring out the right regulatory framework and we can also ensure that some of the straightforward things like operating an exchange without KYC should be an absolute no-no. This will eliminate any provision for anonymous transactions in crypto.
So there are things that the government can do even before regulations can come in and I hope that happens this year where we will see rapid guidelines coming up. Eventually, this sector definitely has to be regulated. As an industry, we are pushing for regulations, we want to be regulated so that the good activities can prosper while keeping bad actors at bay. I do not think you will hear from the investors saying no to regulation. We are not protesting against regulations, in fact I have been tweeting India wants crypto for over 1,000 days with the only objective that we should regulate crypto in India and we should do it sooner than later.