Tuesday, November 30, 2021
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In next 2-3 years, India may have a bigger crypto ecosystem than US: Nischal Shetty


For the first time in history, a global financial market is being built. Until now, the financial markets have all been bound by geography. But a new technology makes it possible to have one financial world, says Nischal Shetty, CEO, WazirX.



Cryptocurrencies right now are the biggest flavour. But do people know what they are investing in? Do they understand the risks with something that is this volatile?
As far as regulations are concerned, we as an industry are pushing for regulations in India and that would be a good step forward for the industry. As far as the growth of the industry is concerned, technology starts as a niche and then things are built and then there is a hockey stick curve when there is rapid adoption. We are seeing that happen in crypto now. It is just the nature of the crypto. Governments around the world are trying to understand this and trying to build the framework. The problem is you cannot use existing regulations on crypto because the nature of crypto is different.

At one end, it feels just like a currency and then one realises that there are other categories of crypto — assets and utilities. We do not have a framework to put on top of the crypto ecosystem. That is why it is going to take longer for governments to regulate it but what will happen sooner is some sort of guidelines enabling good actors to build better products in the space and keep out the bad actors. But the growth is amazing. It is almost five to six times in the last 12 to 18 months and we have seen new start-ups in India, we have seen new investments coming in. We are lesser compared to let us say the US where there are a lot more crypto start-ups, a lot more valuable companies, a lot more crypto companies going for IPO in the US. India has still not caught up with the US but in the next two to three years we will probably have an even bigger ecosystem here.

The views on crypto currencies worldwide are so divided. Some experts have compared the crypto craze to the tulip mania in the 17th century and said a disclaimer should be attached with these investments like in mutual funds.
A lot of these arguments were true for the internet start-ups as well and the internet has gone through its own boom and bust cycles. If you looked at the valuations of internet companies in the 1990s and the 2000 era, the offline businesses were like internet’s scam. We are not valued at this rate. Why is it that the internet companies are valued at 10 times more than us? Today it seems normal because we realise that internet scales really pass and that is the whole thing with crypto.

For the first time in history, we have this global financial market being built. Until now, the financial markets have all been bound by geography. We are all bound to nations’ economies and all of the financial instruments that we have access to are bound by where you live.

Here is a new technology that makes it possible to have one financial world and it is going to be crazy for a while because we understand that there is no going back. I am yet to meet someone who has understood the technology. The general thinking is that crypto is a currency which is the first sign that you need to get deeper into understanding this.

Crypto is a primary divided into four major categories– currency happens to be one of those. The others are assets, utilities and can also be securities. For example, for a long time people thought Bitcoin was a currency but it replicates more of the properties of gold; it is limited in number, it is valued by the trust network that it has which is a number of people in hand. Today there are over 100 million people who own Bitcoins and that is where the value of Bitcoin comes from.

Over 100 million people in the world own Bitcoin. The internet has 4.73 billion people and all they need to do is just be educated about this and get access to owning Bitcoins. There is a large market in front of us. As people understand about Bitcoins, they are going to hold it and there are only 21 million. This is where the economics of Bitcoin works.

But that is not true for the other cryptos. Other cryptos are dependent on what are the use cases behind them. For example, Ethereum is like a global super computer where you can run programmes without needing to use an Amazon or a Google for hosting your programmes in a completely decentralised manner. That is where the token of Ethereum, which is Ether, gets its value.

When we talk about central bank digital currencies (CBDCs) — I am pushing for that — it does not mean you do not need the other cryptos out there. It is like saying that the government has a website, why are other websites needed? Every website has its own function and utility. It is the same with crypto. As we discuss and debate more, these things will get clearer and then more people will get involved in it.



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