India was recently ranked fourth by research firm Chainalysis in its 2022 Global Crypto Adoption Index. That puts it ahead of the US and China. Still, the country has a long way to go when it comes to drafting a crypto policy. In an exclusive interview with The HinduCoinDCX COO Mridul Gupta talked about India’s crypto policy, the Ethereum Merge, and how the industry is moving past coin crashes.
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Edited excerpts from the interview below:
As Ethereum moves to a proof-of-stake consensus mechanism, do you see other cryptocurrencies making this change?
Mridul Gupta: I don’t see Bitcoin moving to the proof-of-stake model because it kind of helps dissolve wealth in a decentralized way. Ethereum solves a completely different use case, which builds the entire block, on top of which further decentralized projects can be built. So it has to be fundamentally proof-of-stake, because otherwise it’s not scalable enough and it burns too much energy. So proof-of-stake, as you move forward, will become increasingly popular because it basically creates an ecosystem that is self-sustaining and can grow as you move forward. Proof-of-work will remain there for Bitcoin and, you know, few other cryptoassets out there, but there will be a few major assets that will be proof-of-work. We won’t see many newer assets coming up on proof-of-work.
What are the immediate effects of Ethereum’s move to proof-of-stake?
MG: So I think the number one after big impact that has happened is just the lower energy consumption. But what is very, very important to understand is how the crypto community – the crypto enthusiasts, the software developers and the Web3 developers – can now participate and fundamentally create value out of the Ethereum ecosystem, which was otherwise not possible. We see how in a proof-of-work environment, if you have to generate value out of the ecosystem, you will end up putting so many servers and so many mining networks, which is a very high capital investment.
Countries like Palau and Bhutan are working with private blockchain companies to develop CBDCs. Can India do the same? What are the advantages or disadvantages of such partnerships?
MG: India is, I think, at a slightly more developed stage in the world, say compared to other countries when it comes to the currency and money movement in the country. So UPI and IMPS have been able to do many things in India which are not possible anywhere else in the world and this is a model we are now exporting to the world. So I don’t know, I don’t think the solution is to collaborate with a public actor or a private actor. What private players definitely bring to the table is understanding of blockchain, scalability of blockchain and understanding of tokenomics. I think the view RBI is taking on CBDC in India, it seems like it’s used more for international trade versus domestic trade, right? Which is a completely different equation. When you do international trade there are so many other parties involved that there will always be private partnerships. I don’t think private participation is the question. What kind of private participation will take place is a question to be answered.
Looking at proposed crypto laws in the US, do you think India will come up with similar rules for cryptocurrencies and stablecoins?
MG: Unfortunately, we are lagging behind the global ecosystems when it comes to cryptopolitics. At least 30 countries are ahead of India. If you look at the US, Germany, Dubai, UK, Singapore, the top 20 or 30 countries out there – everyone has some kind of view on crypto, right? And they come with more nuanced views on the details of crypto. And some of these policies have been very beneficial to the ecosystem. Think of the unicorns, think of the software jobs created in the world because of crypto, think of the efficiency in the tech industry. There needs to be a more concentrated effort by government policy makers and the industry in defining the next frontier for crypto growth in India.
Stablecoins will obviously be an important area to discuss, but I think it’s just a larger policy that we need to answer first. And this is a policy around taxation, a policy around adoption, a policy around a new set of jobs. This is the policy around giving incentives to various global organizations to come and set up their office in India. If that’s not done, I think we’re going to miss the bus on crypto and blockchain, and we’re going to be left behind in this very, very rapidly evolving field.
What kind of crypto scams do you see most often in India?
MG: I think it’s not so much about fraud; it’s about a lack of education. And then with this lack of education, people think it’s a get-rich-quick scheme. And most of it is driven by greed, is what I feel. So when it’s a get-rich-quick scheme, people will come and always put their money in lots of meme coins, right? They would go to an international platform and buy the coin that was launched, let’s say, two weeks back in the hope that it will be 100 times more successful.”
“Secondly, what we have seen is that many local players in different countries and also in India, sometimes end up not doing KYC for the user, which basically results in malicious people coming onto the platform and asking you for money to give you crypto So this is the other big thing that we’ve seen and to counter that what we’ve done on the platform is very, very enhanced KYC which includes your Aadhar check, PAN check, email check , the phone number.
Did CoinDCX shed some employees like Coinbase and BlockFi did due to the crypto market crash and bear market?
MG: We didn’t let any people go. We’re actually hiring right now, so if you have any references, please send them our way. Bulls and bears will continue to happen. The internal motto we end up following is that bear cycles are for building. So you build the right things, you scale the platform, you make it completely foolproof so that when the bull cycle comes and people participate in the ecosystem, [and] participate in the investment markets, you are ready for it and the system is ready for it, and compliance is ready for it, and this management is ready for it. We have enough finances to last for four years or four and a half years even if the income goes to zero.
The collapse of TerraUSD [UST] has damaged people’s confidence in stablecoins. Can the industry move past that?
MG: Definitely, I think every stablecoin has a different way of depositing capital, so they are actually stable. Many improvements are happening in the stablecoin algorithms. Many management changes are also taking place, which leads to more transparency on the capital front. So overall we are improving the transparency, governance and innovation around stablecoins. Is it enough to sustain? Let’s say 30x market size and crypto in the next few years. No, definitely not. I think a lot more innovation will be required. A lot of management will be required.
