Before I proceed, I need to say that I’m a huge fan of blockchain technologies and I personally think it’s one of the greatest inventions since the internet. This is the future and it’s going no where.
In 2017 I had founded Quadarch, our aim was to become India’s first Crypto Hedge Fund. We spent about a year building out a team, technology and strategies to allow Indian’s to hold and grow crypto assets safely. Unfortunately before we could officially get out of beta, we had to shut down due to the 2018 ban on crypto currencies in India. Since then I have had numerous conversations with people regarding India and Crypto and one thing that has come up often is how folks outside of India don’t understand that the current government’s primary agenda when they came into power was to end Black Money and curb Capital Flight. This is essentially the fundamental issue and fundamental fight. It’s not against blockchain technologies.
Earlier today I came across Balaji S. Srinivasan excellent piece on How India Legalizes Crypto. You can read it here. Inspired by it, I decided to put a few quick thoughts of my own regarding India and Crypto. Enjoy.
Do I believe India should ban crypto? No.
Do I think they should legalise it in a phased manner? Yes.
Here is what I propose for Phase 1.
- The Indian government should allow Crypto based funds.
- The Crypto funds publicly display their strategy and (audited) performance.
- The government gives potential investors a “Cigarette” like statuary warning with respect to investing in Crypto funds.
- The new crypto fund investor (investor) is KYC verified.
- The investor buys into the crypto fund using INR, Digital INR (new Indian Stable Coin) or BTC*.
- *The BTC buy in will be allowed for 1 year, after that the investor will only be able to buy in using INR or Digital INR.
- The crypto fund trades crypto assets using their own fund strategy as they deem fit.
- The investor receives their exit/gains either in the form of INR or Digital INR.
- Annually, a standardised gains document is automatically generated and mailed to the investor which he/she can share directly with their CA for tax purposes.
- The investor cannot trade the crypto directly or use it to buy anything during phase 1. They will be however allowed to use Digital INR to make/receive payments.
I think this last point will be controversial but it is important for a few reasons:
- To prevent capital flight / black money (again — the prime objective for the current government)
- To prevent newbie crypto investors from getting scammed by fake ICOs, etc.
- To familiarise the Indian population with blockchain based currencies and educate them on the risks involved in investing into crypto currencies as assets.
Later I’ll cover what I think Phase 2 should look like.