India’s Crypto Economy | Fast Expanding Despite The Odds

Dear Reader,

Will you accept or make payments in crypto?

Will crypto payment emulate the UPI revolution in India?

Far-fetched questions, do you think, given that the local authorities are not happy about crypto assets? But the reality is different.

Since we started our India’s Crypto Economy Newsletter in June, focussing on the Indian crypto startups’ coming of age, the country’s crypto ecosystem has seen a growth spurt. For starters, Mumbai-based crypto exchange CoinDCX entered the unicorn club with a $1.1 Bn valuation. Again, Bengaluru-based startup CoinSwitch Kuber, with over $500 Mn valuation, is set to emerge as the next unicorn in this space. Indian crypto startups have raised more than $130 Mn in the past two months. And the product line-up across sectors has expanded as well.

In fact, one can easily understand the popularity of crypto from this tweet.

Barring crypto payments and transactions, crypto is now disrupting the creator economy space too. According to various accounts, the entire creator economy market is estimated to be $104 Bn. Largely dependent upon brand sponsorship sources, NonFungible Token (NFT) that will stop piracy will redefine the creator revenue model too.

Amid crypto fast becoming a financial tool, helping grow creators, their community, bitcoin is no longer the heavyweight, undisputed king of cryptos. In 2021 alone, its market share has sharply fallen, dwindling to the current 46% from 67% in January. However, we are not just witnessing a ‘token’ war (say, between bitcoin and ethereum) at this time. Core changes are also happening in this space.

With the evolution of decentralised finance (DeFi) that has already hit the $100 Bn market cap and the fast rise of decentralised applications, the crypto industry is expanding horizontally and integrating a slew of verticals such as trading, lending, NFT (non-fungible token), mining, brokerage, banking, insurance and more. This ever-growing crypto community will only help expand the creator economy further.

Besides, with NFTs and token-agnostic protocols in place, users can now deposit any ERC (ethereum request for comment) token into any NFT. DeFi NFTs or interest-bearing NFTs can be a game-changer for the creator economy, thinks Sharat Chandra, blockchain and emerging tech evangelist. “DeFi is the future of crypto. Indian VCs have also woken up to the potential of decentralised finance and are keen to invest in startups exploring this space,” he says.

NFT in India is just the beginning and so are numerous other verticals like insurance, payments, interoperability services, and crypto asset management that Indian startups are yet to explore. They should experiment with both collateral lending and non-collateral lending protocols such as Teller Finance, to address MSME credit gaps and similar issues, adds Chandra.

As discussed in the last edition, the Indian market has not stayed away from crypto’s new avatar despite regulatory hurdles. The country’s crypto market has been flooded with foreign funding in the past year, and innovative startups are exploring different sectors and business ideas to grow in sync with the global play. Companies like Zebi and Polygon have successfully developed layer-1 and layer-2 ecosystems, while crypto exchanges are diversifying to offer NFT, lending, insurance and other products.

Such developments are overwhelming, given that the Indian crypto-economy has continually faced regulatory uncertainties. However, the Indian government’s ‘wait-and-watch policy’, a delaying tactic for sure, has gone in favour of the industry’s growth, a finance ministry official had earlier told Inc42 on condition of anonymity. According to the official, the government is planning to introduce a crypto Bill in the Budget Session next year to regulate this space. And the bad news is: The Bill may disallow crypto trading for good.

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The Crypto Summit: An Event To Celebrate

We have covered the Indian crypto industry since it started taking baby steps. Now that the ecosystem is eyeing a stupendous leap, Inc42 Media, in association with CoinSwitch Kuber, is organising the country’s largest crypto and blockchain summit. The Crypto Summit 2021 will see some of the leading crypto minds of India and abroad discussing and decoding the most mystifying phenomenon since the internet.

Join 1,000+ crypto leaders, thinkers & investors under one virtual roof for a dialogue on India’s Crypto Economy. Click here to know more about the summit.

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Tweet Of The Week

Even as Enforcement Directorate (ED) investigates Binance and its Indian subsidiary WazirX, the parent company seems to be sinking deeper into regulatory issues. As of now, Binance is facing regulatory scrutiny and probes in countries such as India, the US, the UK, Malaysia, Japan, the Cayman Islands, Hong Kong, Thailand, Germany and Lithuania.

In a recent development, Binance’s U.S. CEO Brian Brooks announced on Twitter that he had resigned from his post. Will there be further backlash from inside the company?

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For Binge Reading

Ethereum’s London Upgrade: A few days ago, the ethereum platform underwent a major upgrade that would help it switch from proof-of-work to proof-of-stake and make it more relevant in the De-Fi space. Read the details of the London upgrade here.

Why China’s Crypto Isolating Strategy Won’t Work In Favour Of E-Yuan? With its digital yuan launch in the pipeline, China may have gotten an edge over the US dollar in the future war of global currencies. But banning cryptocurrencies will not go well with China’s global domination plans, argues Michael Schuman, the author of Superpower Interrupted: The Chinese History of the World. Read his blog here.

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Crypto This Week | News Doing The Rounds  

CoinDCX Becomes India’s First Crypto Unicorn

Valued at $1.1 Bn after raising $90 Mn in Series C funding, Mumbai-based crypto exchange CoinDCX recently joined the much-coveted club of Indian unicorns. The funding round was led by Facebook cofounder Eduardo Saverin’s B Capital Group as well as Coinbase Ventures, Polychain Capital, Block.one and Jump Capital, among others.

Nexus Backs Crypto Asset Management Platform Mudrex

Bengaluru- and Silicon Valley-based crypto asset management platform Mudrex raised $2.5 Mn in a seed round led by Nexus Venture Partners. Village Global, Kunal Shah, Anand Chandrashekharan and Anjali Bansal were among those who participated in this round. The company has simplified crypto investing by providing products modelled after mutual funds and exchange-traded funds (ETFs) for long-term wealth creation.

Indian Govt Fails To Respond, Again

When it comes to anything crypto, the Indian government routinely goes into the ‘no-data’ mode. Recently responding to a query in Lok Sabha, the government denied having any data on the environmental impact caused by cryptocurrency mining. A few days ago, finance minister Nirmala Sitharaman told Rajya Sabha that the government had no data regarding the number of crypto exchanges operating in the country.

GainBitcoin Scam: Supreme Court To Hear Case On August 13th

The Enforcement Directorate’s Mumbai branch has now submitted its report in the GainBitcoin Ponzi scheme case at the Supreme Court. The apex court has meanwhile directed to list the case for hearing on August 13, 2021, with victims of the alleged scam continuing to call for the revocation of the bail to key accused Amit Bhardwaj.

In another development, San Francisco-based Poly Network, a startup known for its interoperability solutions for multiple chains, announced a $600 Mn crypto heist on Twitter. Urging the hackers to return the assets, the company also said that it would take legal actions against the culprits.

In India, De-Fi is still in a nascent stage, but crypto scams and Ponzi schemes are quite rampant. Be it the GainBitcoin scam, the Bitconnect India chapter, the Morris Coin scam or others, the Indian crypto market is growing in both directions. There are legal investments and then there are the pump-and-dump schemes by money tricksters that may result in huge losses and long lawsuits.

Till Next Week,

Suprita Anupam