Cryptocurrencies Are Opaque, Investors Don’t Know The Reasons Behind Price Movements: Krish Gopalakrishnan

The 5G technology will lead to the creation of new technology companies, bring efficiency to factories, and will have widespread use around the Internet of Things (IoT), according to Infosys cofounder Kris Gopalakrishnan.

In a freewheeling interview with Inc42, Gopalakrishnan, who currently heads Axilor Ventures and wears multiple other hats, also said that cryptocurrencies are an “extreme asset” class due to their opaqueness as investors don’t understand the reasons behind the price movements.

In this second part of the interview, Gopalakrishnan talks about the need for personal and non-personal data regulations, concerns across the world about the power with digital companies, the importance of Web3 technology and the need for clear regulations for it, among others. The first part of the interview was published earlier and can be accessed here.

Below are the edited excerpts from the interview:

Inc42: You earlier chaired the non-personal data framework committee appointed by the Ministry of Electronics and Information Technology and submitted a detailed report that was partly incorporated in the earlier draft. What’s your assessment of the previous draft? Also, what should be different in the new Bill?

Kris Gopalakrishnan: The Data Protection Bill started with a focus on regulating personal data and then evolved to include non-personal data too. It took us 2-3 years to come to this stage (given the complexity of the issue). I think too many changes made it unwieldy. So the government decided to withdraw it and come out with a much cleaner, simpler draft, which I’m hoping they will do. You have to give them time. And I support that move.

We need to rethink how we bring about legislation in the digital space. It’s a space that’s rapidly changing. It’s a space that requires a bit of leeway for experimentation because we didn’t understand everything that was happening when that draft was prepared. For instance, the whole area of cryptocurrency was just in the very beginning. So there are lots of things that we need to now think about, and I believe the government will come out with a better Bill.

Inc42: The EU implemented GDPR (General Data Protection Regulation) back in 2018. As most of tech startups are highly dependent on data, will the delay and lack of data regulation impact the startups as well as users? 

Kris Gopalakrishnan: Let’s put it in context. Every country is grappling with issues related to privacy, security and sharing of data for public good. And every country is struggling with the power that rests with a few companies. So, of course, I’m selfishly wanting India to be one of the first to come out with the regulations so that we could claim that we were the leaders.

Having said that, we are on this road together. At this point, every country is struggling with these legislations. I think the industry wants certainty, the industry also wants flexibility in case something is not working. They would be keen to see that their inputs are taken to change it. So we should put together a policy and keep industry in the loop on how it’s getting implemented, how easy or difficult it is to comply. And if there are challenges, make modifications as we go forward.

Ultimately, privacy has to be protected. I have absolutely believed that there must not be any compromise on privacy. I’m a firm believer that we need to protect personal data. The data belongs to the citizen and their ownership and privacy with regard to that data has to be ensured.

Inc42: What’s your take on non-personal data and its ownership?

Kris Gopalakrishnan: When it comes to non-personal data, that data belongs to the country. On the other hand, we need to make some of this data available for research for entrepreneurship, innovation and things like that. I hope the legislation that the government is thinking of bringing covers all these aspects.

Inc42: This brings us to Web3 and the crypto space which promises to handle data more effectively. However, because of lack of regulatory clarity, Web3, crypto and NFT platform founders are moving out from India to Dubai, Delaware and other countries. How do you see this emerging space and is India struggling to keep up with the innovation?

Kris Gopalakrishnan: See, this has happened quite fast. And everybody is grappling with this. Also, you need to separate the technology from an asset class which has value based on certain defined parameters.

Let’s understand the difference. We can take a digital painting and create an NFT. So you use that technology to establish ownership. But it’s still a digital painting somebody has created. Just like a physical painting, there is a value associated with data. And the only thing is that since it is a digital painting, I want to secure my ownership to that key. So I use technology to secure my ownership using a non-fungible token technology, it goes into a blockchain and sits there saying, “I own that digital creation”, “I want that digital song”, or “I want the video that has been created” and so on. So there is a technology that establishes ownership.

Now, there are also asset classes that are being created. Crypto is an extreme asset class…is the riskiest because it’s completely opaque. This asset class is not traded in regulated markets, not traded in any reasonable manner. People do not understand why it’s going up, why it’s going down, etc.

Now, coming to Web3, the promise of Web3 is decentralisation. There is no central authority. You are managing the ownership and you’re managing rights and effective use of resources in a decentralised manner. That’s fine, because in Web2 we create walled gardens and create these large companies that manage all the transactions. They decide how value is shared.

In Web3, the value of assets is shared and negotiated by consensus. No one person decides on the value. So that’s the concept. Now the value of the asset itself has a risk associated with that. So even though it’s created through consensus, the Web3 asset class such as crypto is very opaque. It’s the highest risk. It’s fluctuating widely.

This is similar to the difference between private markets and public markets.

We need to clearly categorise this technology. And think about regulating it. See why a decentralised asset class like this was created. They said, “I don’t want to pay taxes. I don’t like when the government is interfering in my life. They are misspending the money that we provide as taxes.” That philosophy no country will accept. Every country says that its citizens will be taxed.

Regulators are grappling with this fast-evolving space. There are tons of questions which need to be answered or we need to have clarity based on their merits. Is it a commodity? Is it security? Should the exchanges be regulated? Should they accept the audit trail? How will the taxes be calculated? Will the state regulator have the opportunity to audit it? Very important questions.

These need to be answered before we can allow the public to transact. If there are a limited number of people playing around just like the private markets, like the venture community is playing around with startups – they know the risk and they are willing to take the risk. A small number of people are playing around with crypto assets. And they know the risk that they will make money and lose money. But when the general public starts investing and losing money and you start selling this as a safer bet when there is no regulation around it, it’s wrong.

Inc42: Another emerging tech ecosystem is around 5G. Prime Minister Narendra Modi has recently launched 5G in India. How do you see it changing the tech ecosystem around startups?

Kris Gopalakrishnan: 5G is required for the transition to the true Internet of Things. With that, 7 Bn people are going to connect 50-60 Bn things to the internet, including machines, cars, factories and everything.

Every transition that we have done has increased the speed of the network and in the process has created a lot more applications. Because latency has come down, prices have come down and created new applications and brought in new people. Now 5G too will bring in new applications for the Internet of Things.

Some very new applications are going to be created and new services will be created. And, therefore, we will see new leaders in the technology space. Right from IBM to Microsoft, Apple and now Tesla, every transition creates new leadership. So I strongly believe that there is a new operating system possible in the IoT space. It will create a lot more economic activity. Factories could become more efficient. Preventive maintenance using immersive technology at affordable costs becomes a reality. Healthcare could change because we can connect wearable devices in real-time; remote surgery may become possible. I strongly believe that a lot more applications will be created to make our lives better.

And, today’s startups who lead these innovations could be tomorrow’s Amazons and Googles.