We talk about how technology will evolve and shape the financial market in the future. However, technological and regulatory changes do not have to go hand in hand. Where can you see the role of regulations on VDAs and Web3 technologies?
New technologies always require that regulations be developed quickly to address this. There is always a balance between regulation and innovation. As for regulation, it is necessary because the government has to take into account the interests of all types of players in different markets. In many cases, participants need to be protected from people engaging in illegal activities, Ponzi schemes where people’s money is taken but not invested properly.
Second, there is constant concern about the lack of a level of play and the fact that some people in the market have information that others don’t and this economy is called information asymmetry. So it is very important to ensure that there is a level playing field for all market participants and this is something that only regulation can achieve.
There is a third reason why we need to have regulations and that is to prevent the prohibited use of various powerful technologies. For example, in the case of digital or cryptographic assets, they can be used for the prohibited financing of criminal and terrorist activities. These are the three or four important reasons why regulation is needed.
We all know that innovation will result in new use cases, new productivity, and how people can do things they couldn’t do before. With the advent of Web3.0 and when it comes to crypto assets, there are many use cases that can be more productive, more powerful than current methods.
For example, now when remittances are transferred between markets, in many cases we pay 3, 4, 5, 6% even as a cost of friction as a cost to intermediaries when we make remittances. So if I transfer $ 100 from UAE to India in some cases I can pay $ 3 or $ 4 commission on that using virtual digital assets and these remittances can be very efficient with little friction.
So instead of paying $ 3 or $ 4 in commission, I could probably make it for 30 cents, or about $ 0.3. In this way, we reduce costs and make things more efficient and faster through innovation. But again, even if we have innovation, even if things get easier, there are risks that need to be managed and this is the balance between regulation and innovation that is needed. Policy makers are always doing this and even on the internet, for example, with the start of the internet, new regulations have to be put in place on intermediaries and on the use of data and so on. So regulations continue to evolve because we need to make sure the public interest is fully protected.
You are currently the chairman of the Standing Committee on Finance. Can you explain the recommendations made by JPC for virtual digital assets?
We have not made any recommendations to date. We held a hearing with various stakeholders related to virtual digital assets and we had a lengthy discussion with various stakeholders. This has been a useful and fruitful discussion and it is in anticipation of the government’s introduction of the Crypto Bill. Of course, the government has decided to wait longer to conduct more stakeholder consultations before preparing the crypto bill and so we will continue our discussions with crypto stakeholders once the government has a position on crypto assets and introduce legislation to regulate virtual digital. properties.
Meanwhile, the government has introduced a fiscal framework for virtual digital assets which is being discussed as part of our budget deliberations and of course the budget for this fiscal year has been passed and started from April 1st.
Crypto assets are important for Blockchain technologies because there are many cases of use of this technology. There are reports that the government is considering regulating it. What is your opinion on the government’s current stance on not regulating Metaverse or Web3.0? Can you enlighten us on that?
I can never comment on the government’s policies and thinking about it. This is not appropriate and we will have to wait for the government to complete the consultation process and then issue a white paper or crypto bill that we can discuss and debate. Hopefully, as part of our committee, we can also evaluate in detail. We will have to wait for the process to open.
Meanwhile, there are very important use cases. I have already given the example of remittances. There are other important use cases, for example land records. For example, in intelligent contracts, the Blockchain and the Metaverse could play an important role in India’s economic growth in different ways.
We are already a leader in games of all kinds, we are already a leader in animation, we are already a leader in virtual worlds and have Blockchain and distributed entertainment technology that we can use for these purposes can be very useful as part of our growth and as part of our leadership of these new technologies.
While India is a software superpower, it is still miles away from the Blockchain revolution that is happening around the world. How do we catch up? What is your opinion about this?
I don’t agree with that. The thing is, we have a lot of smart young people, a lot of teams working on different use cases that are unique and adapted to the Indian conditions and many of them have been scaled and tested.
Of course, there is no financial aspect at the moment just because we need to create a proper regulatory framework for virtual digital assets, but many different use cases have already been tried and experienced. We have the third largest start-up ecosystem in the world and so many funded start-ups, I think once the regulatory framework is in place we can bring the financial aspect of that as well.
There are many use cases that don’t really require the financial part and these can be Blockchain applications or technologies like smart contracts.
Do you see digital assets and NFTs as potential ways to invest in the future?
Perfectly. I believe that in the future, virtual digital assets and NFTs will be a very, very interesting asset class because they will be tied to specific use cases that will make existing solutions obsolete. For example, if you take away the ability of NFTs to have a way to secure ownership of digital assets – say if you have an image that is a digital movie – then you can secure ownership of it. using NFTs. If you have digital art of any kind, you can be sure to own it. Photographic images, historical photographs can be captured with NFTs. So there are some good metaverse use cases that can only be secured and transferred from one owner to another through NFTs.
NFTs can be very important as we spend a lot of time in the metaverse. We already have so much time on the smartphone or PC, screens of all kinds and most people spend three or four hours a day between TV, phone and other devices. This will move further into the metaverse where we can create a whole series of more interesting and exciting applications and once we enter the metaverse and spend four, five, six hours a day there, we need to secure our goods and digital assets.
For this, NFTs are a unique application and people need to do it and while you are in the metaverse you also need to be able to transact. You can buy some experiences, digital art and some assets that you want to display in the metaverse and so we need to transact and in order to transact we need crypto tokens. This is what we do in the physical world.
So, increasingly, while we spend four, five, six hours a day in the metaverse, we also need to be able to transact there. It is inevitable and it is necessary. How it is formed can be a balance between regulation and innovation. The role of various crypto tokens, crypto assets, the role of sovereign digital currencies will improve over time, but trends are inevitable. We’ll be online in the metaverse for several hours a day and we need all the virtual digital assets, all the crypto tokens.