We ensure that crypto transactions are in the KYC framework: CoinSwitch CEO

Crypto will pave the way for Web 3.0, a new internet that is open and shared, says CoinSwitch CEO Ashish Singhal

Crypto-based fintech companies continue to live in an uncertain regulatory environment even as they are pushing ahead with self-regulation and embracing the “know your customer” (KYC) framework. In a conversation with Pranjal Sharma, the co-founder and chief executive officer of CoinSwitch, ASHISH SINGHAL, says that crypto is an integral part of Web 3.0 and India must find a path to make the most of the new emerging technologies. Singhal was among the unicorn founders from India who participated in the annual meeting of the World Economic Forum in Davos in May.

The markets are in a rough cycle, both traditional equities and crypto. Are you as bullish as ever on crypto now?

Absolutely. The fundamentals of crypto and the potential it holds for the future remain unchanged. Tough times are a painful but timely reminder of the importance of building businesses and products that solve user-problems and are sustainable.

The current bear market is a result of several factors, from economic to geopolitical. That the equity markets, especially the Nasdaq tech stocks, too have fallen in lockstep with the crypto market is proof of that.

This will not stop the technological shift caused by crypto. We are way past that. Today, crypto is an emerging, internet-native asset class that millions of users have adopted. Tomorrow, crypto will pave the way for Web3, a new internet that is open and shared. The potential is thus immense.

There are reports of crypto talent moving base to friendlier regulatory environments. What impact will this brain drain have?

While I cannot speak for those who have moved base, it’s clear that a technology race is on to master crypto and the capabilities it possesses.

The adoption rate of path-breaking technologies is never uniform — some economies are faster than others. These trend-setters naturally become attractive to top-tier talent from around the world. We have seen this cycle play out several times before — post the industrial revolution, the internet era, and lately, following the advancement in artificial intelligence. The same cycle could play out in crypto as well.

The good news is that for India, these are still early days. India can still get ahead of the curve if it recognises the technological advancements crypto brings, and maps out policies that look to the future rather than get weighed down by the distant and unrelated past.

There is a lot going in India’s favour — for the first time, in many ways. The growth phase of technology — be it the internet or Crypto — begins when there is a meeting of talent, capital, and users. India has all three ingredients. This is why at CoinSwitch, we believe India is the place to build. The last piece of the puzzle is regulations. I’m hopeful this, too, will follow.

But regulators have raised concerns over illicit transactions and a lack of traceability. How is the industry addressing that?

The concerns raised by the regulators over money-laundering and terror-funding are legitimate. The Indian crypto industry, through the Blockchain and Crypto Assets Council (BACC), therefore has proactively set up self-regulatory mechanisms to establish KYC norms and best practices that are on a par with traditional financial services.

The next step for India should be to standardise the KYC norms, redress and reporting mechanisms through a comprehensive crypto law. Exchanges and platforms should be brought under a regulatory framework to close the loopholes.

On the CoinSwitch platform, users purchase crypto assets in Indian rupees through a registered and verified Indian bank account, and we hold their assets in state-of-the-art custodial wallets. When a user places an order to sell, we execute the order on their behalf and sell the crypto from the custody and transfer Indian rupees to their account.

We thus ensure that the entire cycle of transaction remains within the KYC framework. The transactions remain transparent and traceable.

Crypto as an asset class has evolved rapidly. There are exchanges and brokerages, exchange-traded funds, systematic investment plan schemes, and even derivatives. What are the steps the industry takes to educate users?

Crypto is a new and emerging asset class. When compared to the overall asset classes, it makes up a small share of the capital invested. But notably, crypto has been able to bring on board a significant share of first-time investors. Therefore, educational campaigns, explainers and videos play an important role.

This is why I say CoinSwitch is not just a crypto-investing app but also an ed-tech platform. We actively communicate to our users the importance of research before investing. Further, we equip them through informative videos, blogs and infographics to guide them through not just the fundamentals of investing but also different schemes such as SIP, Limit orders, and Stop Loss.

You were at the first-ever Summer Davos recently. What’s your takeaway from the summit?

The World Economic Forum is the biggest stage for policymakers, business leaders and change-makers to come together and work towards a common objective. It was truly great to see the global community’s interest in Indian startups and companies. The world has recognised India’s technological prowess and truly foresees India as the next frontier of technology.

Crypto startups, especially, were the talk of the town. There is a great interest among policymakers across the world to take the lead in developing and shaping Web3. They realise that the current model of the internet, wherein a few centralised companies hold outsized influence, is not ideal. 

The challenge is to take the learnings from Web2 to build an internet that is equal and shared, where users have greater control. This requires close collaboration between businesses and policymakers, and the World Economic Forum rightly highlighted the need and enabled such engagements.

In the words of Prof Klaus Schwab, the founder and executive chairman of WEF, the technology-led Fourth Industrial Revolution is evolving at an exponential rather than a linear pace. To adapt, governments and regulatory agencies will need to collaborate closely with business and civil society.

Web3 was the talk of the town at Davos. How do you see the development of Web3?

Web3 addresses many of the concerns that handicap the present-day internet — from data security to ownership. It gives power back to the user, making her a stakeholder in the platforms she uses. She owns her identity, her data, and her experience.

This model of the internet benefits India. Today, India has over 700 million internet users. They form the largest user base for today’s internet platforms. India also has a large talent pool of software developers, content creators, and a robust startup ecosystem.

Web3 benefits all these stakeholders of the internet ecosystem: users will have greater control over their data and digital identity; content creators will get a fairer deal; and, India’s startups will have greater say over the internet infrastructure.

India already recognises the benefits of shared infrastructure. The government’s efforts towards building ONDC, the open e-commerce ecosystem, is proof that this government does not want the pillars of the internet ecosystem to be centralised.

It is my strong belief that the government will also recognise the potential of Web3. India missed the bus on Web2, and the companies that were built in the West then are today’s internet gatekeepers. Web3 provides India an opportunity to take the drivers’ seat.