As attention to cryptocurrency and blockchain technology grows around the world and in India, the implications of taxation and its possible regulation are being weighed. While some view the emergence of this decentralized system with caution, others are trying to figure out how to integrate it into a world that already has its financial systems established. A. Damodaran, a professor of economics and social sciences at the Indian Institute of Management in Bangalore, says the potential of cryptocurrencies as decentralized finance is over and India should focus on creating a national blockchain strategy to make it a global player.
Edited excerpts from the interview:
Should cryptocurrency be considered a currency or a digital asset?
Cryptocurrencies have failed as means of payment and, therefore, as currencies. They have become the category of digital currency as assets. Today, cryptos are speculative assets, as evidenced by their volatility.
Why are governments around the world rushing to ban or regulate cryptocurrency?
Governments believe that cryptocurrencies threaten macroeconomic stability and lead to revenue leakage. Cryptos are considered assets floating on thin ice, which poses a serious risk to its investors. The role of cryptocurrencies in the dark web is a serious concern.
Read also : India has a crypto dilemma
Many critics say cryptocurrency is the West’s way of controlling financial systems around the world. How do you see it?
Cryptos were designed to be unalloyed global commons. They were based on the maxim of distributive justice. The first generation of blockchains had serious monetary ambitions, as they focused on creating a currency with a strong deflationary edge. These dreams were abandoned by subsequent generations of blockchains, such as Ethereum, where the focus was on improving the quality of trade through smart contracts. Despite all of this, crypto trading platforms were a far cry from the ideals of distributed networks. This has led to an excessive concentration of cryptos and digital assets with a handful of super rich in the West.
But, there is another way to look at this scenario. According to one estimate, there are over 100 million crypto asset owners in India. We are ahead of the United States here. With the industry’s transition from blockchain to staking [that is, earning rewards on verifying transactions] to a large extent, the large base of Indian crypto owners could spawn several technologically proficient companies in the blockchain space. If played well, we could become a major countervailing force to the cryptographic power of the West.
What do you think of the blockchain industry in India? Is it strong enough to support the crypto sector?
India has contributed a tremendous pool of blockchain specialists, some of whom have developed amazing world-renowned blockchain platforms – Polygon, for example. During the last years,
Many state governments, like Telangana, Kerala, and Tamil Nadu, have launched blockchain-related skills programs to improve India’s talent pool.
The National Blockchain Strategy, which was released by the Ministry of Electronics and Information Technology in December 2021, has two features that will make a critical difference for the growth of blockchain businesses in India : a strong focus on customer support and on asset creation and follow-up.
How do you see the future of the crypto industry in India?
In the absence of a national policy, the industry lives in uncertain times. This must stop. If we are able to launch a national utility tokenization program under the Digital India program, we can create a unique trajectory for our national blockchain strategy.