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India requires cryptocurrencies with marketing regulations: Rajagopal Menon by WazirX

India requires cryptocurrencies with marketing regulations: Rajagopal Menon by WazirX
 
    Indian cryptocurrency exchange WazirX, part of the Binance Group, oversees cryptocurrency trading in 180 countries. The cryptocurrency trading firm claims to have made 67 million transactions during a bullish month for cryptocurrency prices. WazirX VP Rajagopal Menon spoke with FE.com’s Ritarshi Banerjee about the impact of blockchain technology on cryptocurrencies and the company’s future prospects. (Editor’s Excerpt) How is blockchain technology impacting the fintech industry, especially for cryptocurrencies?
 
 
    The fundamental problem with digital currency is its replicability, which leads to double spending. The birth of Bitcoin solved the double-spending problem. A digital ledger is created that is connected to multiple computers in the world, and miners are created to help verify transactions taking place across the chain by checking wallet addresses to exchange coins to be exchanged in real-time. Miners are incentivized to secure the chain by solving complex algorithmic problems, and after solving, the solutions flash across the network and continue. Ledgers around the world are also updated. Its transparency lets everyone know the wallet balances that exist globally. Thus, the creation of Bitcoin leads to the storage and transfer of value. Only 21 million bitcoins cannot be added. People say blockchain is good, cryptocurrencies are bad, and cryptocurrencies are what motivates people to protect blockchains.
 
    How does WazirX instill confidence in an Indian market that lacks regulations and policies?
 
    India requires regulation in cryptocurrencies because people want to invest, but due to lack of regulation, they cannot. For the current tax system, we need regulation because it will make people believe in it and they will have a sense of trust in government investment. We think a 30% tax is on the high side, but we also think the 1% tax deduction at source (TDS) imposed by the RBI on cryptocurrency transactions is still open for discussion. It can be levied in the manner of a securities tax that occurs in the stock market and should be negotiable. High frequency traders and day traders in the cryptocurrency market will fail due to 1% TDS. Our fear is that trading volumes will collapse, but the big exchanges will survive. Smaller exchanges will fail. This is questionable, but we hope the government will provide some clarity because all exchanges are KYC driven and we have money laundering mechanisms.
 
    How will the financial landscape change if cryptocurrencies are centralized?
 
    There are two ways to view it. It is believed that traditional currencies are devaluing as governments print more cash, which increases inflation and reduces the value of the currency. Bitcoin was created because it imitates gold because the supply of gold is fixed. Bitcoin’s inflation rate is around 2%. Bitcoin was built as an alternative to gold, specifically to bypass any government centralized efforts. There are chains like Binance Smart Chain that are centralized. Therefore, centralization and decentralization each have their own pros and cons, which is called the blockchain triad, including issues of scalability, security, and speed. To solve this problem, there are different centralized blockchains. The Reserve Bank of India has announced a central bank digital currency (CBDC) initiative. CBDC can be used for internal bank settlement. The biggest case that a CBDC could potentially solve is stablecoins. Assuming the existence of the digital Indian National Rupee (INR) will make buying cryptocurrencies easy. It basically depends on the user case.
 
Global cryptocurrency revenue in FY21 was $163 billion, and WazirX’s trading volume was $44 billion in the same year. What's driving these revenue margins?
 
    This is the market capitalization in question, and it is equal to the ratio of a currency's value to its single digit. The market cap of cryptocurrencies is $1 trillion. To understand how the cryptocurrency market works, it depends on the bulls and the bears. WazirX completed about 67 million transactions in a month when the cryptocurrency price rose. In the Indian stock market, circuit breakers are used when the share price exceeds 8%, and then the trade is disabled. In cryptocurrencies, volatility can reach 200-300% within a day. Also, the cryptocurrency market is 24×7. For example, when the price of Bitcoin rises, everyone rushes in, and when Ethereum or other coins rise, the overall market stabilizes. The cost of Bitcoin is actually determined by a supply and demand function. When many people want to buy Bitcoin, the price increase is driven by other unforeseen factors.
 
    How does WazirX solve the knowledge limitations of people who are still unsure about cryptocurrencies?
 
    What happens is that people are interested in the prospect of making quick money, but in WazirX, cryptocurrencies are like any other financial asset. People need to keep investing in cryptocurrencies. The trick is to invest in gold-plated and viable long-term projects. There are about 10,000 tokens in circulation, and WazirX has about 200. Our Youtube channel also helps people understand investing in cryptocurrencies and how they should do it. We do not rely heavily on marketing. Instead of mass advertising, we focused on educating the public about the space.
 
    How difficult is it for Indian cryptocurrency exchanges to operate in terms of policies and regulations?
 
    This is not a new phenomenon. If you look at the latest startups, they are all headquartered outside India. The Web3 space has received so much attention due to the regulations that have occurred and the issues companies are facing with their solutions for FIAT. When it comes to cryptocurrency exchanges in India, the policies are conservative and the founders want them to be free to experiment. The rule in the Indian space is that regulation precedes innovation, which has led to a brain drain of cryptocurrency innovators.

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