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Cryptocurrency adoption: Time to say yes to crypto? Experts discuss growth, regulation

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Cryptocurrency adoption: Time to say yes to crypto? Experts discuss growth, regulation

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The world over several countries have taken bold steps to recognise cryptocurrencies. These include Singapore, the European Union, United Kingdom, Japan, Canada.

Cryptocurrencies are growing in popularity. Research from Chainanalysis shows this year, crypto adoption has risen 880 percent in the 12 months and the number must have grown much more in the past two months, with India ranking among the fastest-growing crypto markets, crypto adopters. 
However, the Indian government's approach to crypto regulation has been guarded since 2018. The Reserve Bank of India had banned banks from having anything to do with virtual currencies and those companies, but a court order was struck down in 2020. 
Earlier this year, the government said it is proposing a bill that will make it illegal to issue, hold, or mine cryptocurrencies, except the government-backed virtual currencies. But, the status of that bill has been unclear since then.
Meanwhile, the world over several countries have taken bold steps to recognise cryptocurrencies. These include Singapore, the European Union, the United Kingdom, Japan, Canada. These jurisdictions have proactively recognised and regulated crypto exchanges. Their rules are of three kinds.
First, most of these jurisdictions have mandatorily asked for registration and reporting requirements from agencies and even P2P apps. Second, and the more important one, all of these regulate exchanges from a know your customer (KYC) point of view, anti-money laundering point, and countering of terror financing -- these are the angles in which they are regulated. The third is taxes - which vary widely, some call it capital gains, some call it business income, so that taxation varies widely.
Yet, among the largest economies, the United States, China and India are deeply skeptical of the entire asset class. So, the big questions we ask experts are is it time to say yes to cryptos? And if yes, which jurisdictions have better rules in terms of allowing innovation, yet ensuring safety, both in terms of protecting the customer and in terms of ensuring that anti-money laundering is not resorted to?
To discuss this in detail, CNCBC-TV18 spoke to two experts who have worked in many jurisdictions, Ronit Ghose, Global Head of Banking, Fintech & Digital Asset, Citi Global Insights, and Ajit Tripathi, Head of Institutional Business, AAVE, which is an open-source portal that enables earning interest on deposits and borrowing assets.
Crypto adoption
Ghose said crypto has become a real mainstream phenomenon in many countries now, particularly in the US, and also in emerging markets like India, Vietnam, and Africa.
“This is how it's different. To say four or five years ago, in 2017- 2018, when we first began noticing our clients asking us questions about crypto, particularly Bitcoin, it tended to be clients in Asia and Hong Kong and Japan, China, Korea but now it's global, and particularly in the US, but also emerging markets with the younger demographic, kids in 18 to 30 age group – crypto has become very mainstream,” said Ghose.
According to him, there are certain positives to crypto programmability, tokenisation, etc but there are also quite a few risks. “It is a volatile asset, it is opaque and that is one of the reasons why we are all still grappling with what the right approach to it is from a regulatory perspective,” he added.
Jurisdictions that allow crypto and which are better
Digital currencies or cryptocurrencies are about a new type of internet. So, there is a money perspective on crypto, and there is a technology perspective, said Tripathi, adding it is really important to highlight Web2 and the internet perspective. It’s because fundamentally, nation-states who are grappling with the internet even before the evolution of cryptocurrencies, which is digital money, that one can move on the internet. Nations like China and US have been struggling with what the internet should look like, and how they essentially control the internet right.
The AAVE protocol, for example, is deployed on the public Ethereum blockchain and two other blockchains, including Avalanche and Polygon and Polygon is a team based in India. So, there isn't a jurisdiction that one can tie the Web3 technology to, it is just like the internet, it is just an evolution of the Internet, where people are able to decentralise the internet more and free it from the grip of four or five major companies, said Tripathi.
He added that now the global regulators and policymakers are learning how to deal with it. Therefore, he said he cannot point out which jurisdiction is better or worse because regulatory approaches differ.
However, it is important for regulators to look back at Bill Clinton and Al Gore's approach, which is the ‘Do No Harm’ approach back in the 90s to think about how to regulate this type of innovation, he added.
Is it time to say yes, to cryptocurrency? Can governments afford to wait, or is it that governments like India or the US have to start mandating registration, reporting, KYC etc.?
Ghose said people can't wish away the internet, they can't ban blockchain and in the same way, it is really hard to ban crypto. So there is need to think about how to protect consumers from scams, risks because of crypto. It is volatile, so there is a need for protection for mom and pop investors without killing innovation, he said.
“The great thing about the internet is that innovation can happen anywhere. It can happen in India, it can happen in Kenya, it can happen anywhere. So we have got to seize that opportunity without killing the upside. So you got to think about how do I protect mom and pop and so you do need regulation and you cannot just ignore it or completely blanket ban it because then you just push it underground,” Ghose said. 
For the full discussion, watch the accompanying video
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