Cryptocurrency firms mull moving offshore amid ban buzz in India

The buzz around the ban on cryptocurrencies in India has created an uncertain environment for crypto exchanges. Ecosystem players working in spaces like non-fungible tokens and blockchain too are in a tizzy. Many founders are planning to move their businesses to either the UAE or Singapore.

According to the data from Venture Intelligence, funding for crypto- and blockchain-related start-ups in India rose 20-fold this year. While CY2020 saw five such start-ups receiving $8 million, 24 companies attracted $502 million this year to date.

The data from Tracxn shows that 376 firms have been founded in cryptocurrencies since 2011. Similarly, India saw 711 start-ups being founded in the blockchain category and around 12 in the NFT category.

Harsh Rajat, founder of EPNS (Ethereum Push Notification Service), said: “If such a thing (ban) happens, we would have to move out of India. Our lawyers are looking at what to do in such a situation.”

EPNS is developing a communication layer on the Ethereum blockchain and the start-up has raised $1.6 million in seed funding from the likes of crypto evangelist and former Coinbase executive Balaji Srinivasan and noted Silicon Valley angel investor Naval Ravikant.

“But we would not like to go elsewhere as then we would have to work as employees or consultants with other venture capital firms at first till we can get a company registered in our names outside,” he added.

Chingari, a short video app that gained prominence following the ban on Chinese apps last year, said recently it would adopt a crypto-led model for monetisation and incentivising creators on its platform. Its native crypto token GARI currently has a market capitalisation of $30 million.

Founder and Chief Executive Officer (CEO) Sumit Ghosh told Business Standard on Thursday: “If there is a ban, we would have to scrap the crypto token-based monetisation model for India and fall back on advertising. However, Chingari is expanding to countries like Indonesia and the crypto model should not be a problem there.”

Several other founders Business Standard spoke to said though a ban was unlikely, the environment was uncertain and many had chosen to move their companies to other regions.

“Globally governments have not banned cryptos but they have been regulated. We are hoping a similar thing will happen in India also. Within the industry, we have heard of several founders moving businesses to Dubai and Singapore due to the FUD (fear, uncertainty, and doubt) phenomenon,” said Abhishek Singh Rajpurohit, co-founder AcknoLedger, a blockchain project that maps, monetises and distributes Web 3.0 digital assets. It recently raised $1.53 million as a seed fund from 30 investors and venture capitalists.

Crypto start-up Vauld, which allows Indian users to only hold and trade digital assets, said it hoped there would be a grandfathering clause that would allow its users to exit their investments without panic-selling. The start-up is based in both Bengaluru and Singapore, where it has to date even facilitated crypto loans of $500 million.

“If cryptos are banned, Indian developers would no longer get into decentralised finance and be left out of the tremendous innovation that is happening in the crypto world. It would be a shame,” said Darshan Bathija, founder and CEO of Vauld.

Several NFT platforms said they would not need to shut shop in the case of a ban. NFT platforms will be able to move to a system where NFTs can be traded in terms of a central bank digital currency or even a fiat currency, but it could disrupt business.

“Building such a system would involve the co-operation of intermediaries like payment gateways and banks -- and that would take at least two months,” said Toshendra Sharma, the founder of NFTcally, founded this year and it is incorporated in the US.

According to crypto exchange WazirX founder Nischal Shetty, a ban would mean flight of crypto and blockchain start-ups from India. “The government will take middle ground. Otherwise, what would happen to the 15-20 million crypto investors in India who hold more than $4 billion in assets? Who will buy their holdings,” he asked.

"A ban would stop all innovations of cryptocurrencies in India itself. Any entrepreneur who wants to create companies on blockchain will have to move outside India," said Ashish Singhal, founder and CEO of Coinswitch Kuber and Co-chair of Blockchain and Crypto Assets Council (BACC).