Digital Currency Conclave 2022: Cryptocurrencies, or crypto assets, are here to stay but investors should take caution until proper regulations are in place, several experts said during the two-day Digital Currency Conclave organised by financialexpress.com on 11th and 12th January 2022.
Experts also said that Blockchain technology, the tech behind crypto, provides India with a huge growth opportunity. However, regulations are required at the earliest to make the most of this technology.
“The Government has two options – either make India a laggard or take this technology, which can bring back India’s glory days. India is already the software factory of the world. Even with so many restrictions, we have the largest number of engineers in the blockchain space… Imagine if there is a promotion of the technology in the country then we would become a Blockchain superpower,” said Sandeep Nailwal, co-founder, Polygon.
ALSO READ | Digital Currency Conclave 2022 Full Highlights
However, Nailwal rued that the tough stand against crypto is leading to brain-drain from India to places like Dubai and Singapore. If positive regulations do not come, brain drain would accelerate.
“Because of this tough stand against crypto, I am seeing a huge brain drain out of India. Technically, all the bigger projects in the Indian ecosystem are moving to places like Singapore, Dubai and some of the places where regulations are friendly. And this will only accelerate if India doesn’t provide them at least a sandbox kind of environment where startups can thrive,” said Nailwal.
CBDC to replace cash, not just eliminate?
Talking about the proposed CBDC, Suvir Davda, Director, Corporate Sales, Markets & Securities Services, HSBC India, said, “Our CBDC use cases would be different from the rest of the world. On the wholesale and retail side, CBDCs would add value.”
Davda further said that CBDC introduction is going to be a slow process. “Introduction of CBDC is going to be a slow process. There are two models currently – direct and hybrid. Most central banks across the world are looking at a hybrid model.”
Watch: Digital Currency Conclave 2022 – Day 1
Bipin Preet Singh, Founder and CEO, MobiKwik, said a CBDC would seek to replace cash, not just eliminate it from circulation. “CBDC is no longer about eliminating cash but replacing it with equal digital funds. In the current digital payments, money is stored in banks. Individuals don’t have a store of value, can’t transfer without going through intermediaries.”
How to regulate what is inside the metaverse
While the Government is planning to introduce regulations for crypto-assets and exchanges, experts working in the metaverse space are worried about how to regulate what happens inside the metaverse.
“We are expecting regulation from the Government for crypto. But for other parts, like behaviour inside the metaverse, we are a little worried. Because there is going to be freedom of speech inside metaverse. With multiple avatars, you cannot have a profanity filter for speech. So that’s something that worries us,” said Pushpak Kypuram, CEO, NextMeet.
Follow best practices to avoid crypto fraud
Experts said that both crypto customers and exchanges should follow the best practices to avoid fraud till regulations are in place.
“What can help in creating a safe space for investors is a regulatory framework that not only addresses use cases of crypto that is allowed but can operate licenced sort of environment and protect consumers,” said Shilpa Mankar Ahluwalia, partner and head- Fintech, Shardul Amarchand Mangaldas and Co. “Consumer awareness is also required,” she added.
Darshan Bathija, CEO and Co-founder, Vauld, said, “Transactions are irreversible in crypto, primarily because once transactions are on-chain, they are immutable and irreversible. So the responsibility is on both the platforms as well as the customers that they follow best practices.”
“The second most common way people tend to lose funds is by not securing the account themselves. Reusing passwords, having an email with a very weak password that is possibly recycled and not applying 2-factor authentication are some of the factors that increase the chances of fraud,” he added.
Drastic changes in cryptocurrency space expected
Gulshan Rai, Former National Cyber Coordinator, Government of India, was of the view that drastic changes would be seen in the crypto sector soon and many small players may die.
“In future, the systems will evolve. There are predictions that situations will change drastically by end of 2022. Smaller players will die down. I am 100% sure that things will change when Government comes with the regulation or international regulations come. Chinese regulation is not going to impact more,” Rai said.
Crypto bubble will burst one day, CBDCs will win
While highlighting the need to nurture the Blockchain technology in India during the concluding session of the two-day conclave, former Union Minister Milind Deora said, “Eventually what will happen is that craze around cryptocurrencies as an asset class will start to wane. Eventually, there will be a currency aspect to it. When Governments and Central Banks around the world start launching their own CBDCs, then those will be far more reliable forms of digital currency for somebody who wants to transact.”
“Money will move in a digital form. And eventually, the private guys who are running private exchanges currently will have to compete with global currencies,” he added.
Watch: Digital Currency Conclave 2022- Day 2
Deora also said that the current craze is not the same as originally envisioned by the founders of cryptocurrencies in 2008.
“Now it has become an asset class… it’s like a bubble and when the bubble bursts then people will see cryptocurrencies for what they really are, i.e. an instrument of transaction. At that point, CBDCs will win over cryptocurrencies,” the former Union Minister said.
Deora suggested investors steer clear of crypto assets till regulation is in place. “Get out of cryptocurrencies till such a time SEBI or a Government-approved regulator starts regulating crypto. As we have seen in the past, the ultimate loser is the investor.”