New Delhi | Ashish Singhal: The global crypto industry has grown by leaps and bounds over the last decade. Today, the total market capitalization of crypto assets is a little over USD 1.9 trillion. To put it in context, the total market capitalisation of stocks on the National Stock Exchange in India is under USD 3.5 trillion. Globally, venture capitalists have pumped in over USD 33 billion in the crypto ecosystem in 2021.
High returns from crypto assets like Bitcoin and Ethereum have attracted investment banks and institutional investors. According to independent estimates, crypto hedge funds globally hold over USD 3.8 billion in crypto assets. At least 26 per cent of the US population hold Bitcoin.
Even traditional financial institutions are changing to keep pace with the technological shift. Wall Street giant Goldman Sachs this month processed the first over-the-counter crypto trade. Investment banks Morgan Stanley and JP Morgan are offering their high-network clients access to funds that invest in Bitcoin.
Crypto assets are even indirectly being listed on regulated stock exchanges through Exchange Traded Funds, or ETF. An example is the ProShares Bitcoin Strategy ETF (BITO), which is listed on the New York Stock Exchange. Recently, it became the fastest ETF to amass USD 1 billion assets under management.
Regulatory clarity in India can drive such foreign investments into our country, boosting India’s economy, improving our Ease of Doing Business, and creating jobs.
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The continued absence of regulations in India could also contribute to the loss of human capital. India has the second-largest number of blockchain developers in the world. These talented software engineers and developers are major contributors to hackathons and other programs. Some of them have become entrepreneurs, building startups solving real-world problems in India.
If India does not implement an enabling regulatory framework, these innovators will be tempted to move to foreign countries offering greener pastures.
Recently, Dubai introduced laws that would provide licences to crypto companies. East Asian economies of Singapore, South Korea and Japan, too, have regulations designed specifically for the crypto ecosystem. In the United States, the state of Wyoming has attracted several crypto-financial institutions with one of the most progressive laws in the world.
These countries are hoping to have a head-start in the technological revolution caused by cryptos.
India has been at a similar juncture before. In the early 1990s, talented Indian engineers and software developers migrated to the US at the dawn of the internet — or Internet 1.0 — lured by nimble companies like IBM, Microsoft, and Google. These companies have since grown to be the gatekeepers of the internet.
With crypto technology, India now has an opportunity to lay the foundation of the new internet, Web 3.0. Our country has the talent-density and technological prowess to lead this transformation.
India’s population-scale digital infrastructure like the UPI and Aadhaar are ahead of even developed countries. Combining these forces with blockchain technology can unleash a technological shift. But this can be possible only if India has an enabling regulatory framework that recognizes the true potential of cryptos.
