The fallout from India’s regulatory position on cryptocurrencies is leading to an exit of talent, businesses and investment from the country’s blockchain space on a scale paralleled only by a prior wave of tech industry flight during the internet boom of the late 90s and early noughties.
According to a recent News 18 report, a substantial number of developers, service providers and other organisations within India’s cryptocurrency and blockchain sphere have already fled, or are in the process of fleeing from India to jurisdictions with friendlier regulatory dispositions such as Thailand, Estonia and Switzerland.
Ring-Fencing by India’s Government
Recently, the central government of India has been engaged in a series of regulatory actions designed to ring-fence the Indian cryptocurrency industry, ostensibly to combat money laundering and tax evasion. CCN reported a few days ago that the Reserve Bank of India (RBI) filed an affidavit in the Supreme Court stating that under the provisions of the Coinage Act and the RBI Act, bitcoin is not recognized a valid payment system under the Indian constitution because there is no backing legal framework for it.
Spooked by this and other actions and pronouncements by government agencies and officials, the cryptocurrency ecosystem in India is experiencing an exodus of talent and investment comparable to the way India’s tech industry once hemorrhaged talent to Silicon Valley. The blockchain ecosystem, which includes developers, cryptographers, traders, cryptocurrency exchange platforms, blockchain service providers and other affiliated people and organisations is on the cusp of a new wave of brain drain, which could prove disastrous for the nascent, relatively small industry.
Speaking to News 18, a number of exchange platform owners revealed that they have already identified potential locations outside of the country and are in the process of relocating.
Asking not to be identified, one such owner said:
“There are talented people and companies in India’s blockchain community but the constant fear of a sudden shutter coming down is forcing them to move out. Moreover, why not? Business always thrives in a place which is product-friendly.”
Profiting from India’s Loss
Some popular destinations for blockchain talent and investment fleeing India’s hostile regulatory landscape include Singapore, the UK, Switzerland, Japan and Estonia, amongst others, but Estonia, in particular, seems to be doing better than most in benefiting from India’s loss of such people and organisations.
Already rated as one of the easiest places to do business in the world, and with a very blockchain-friendly regulatory atmosphere, Estonia also launched an e-residency programme in December 2014 which further simplified the process of registering a company in the country. Its representatives held a session in India with the aim of attracting entrepreneurs, eventually bringing in 200 registered Indian startups.
In India meanwhile, the government’s antipathy toward bitcoin and other cryptocurrencies continues unabated, with the RBI revealing recently that its blanket ban on banks facilitating crypto trading processes was not in fact based on research or benchmarking to global regulatory standards. The revelation, which was contained in an affidavit filed in response to a Right To Information request from a New Delhi lawyer, indicates that the government’s position on crypto trading is effectively based on negative sentiment as against actual regulatory concerns.
Amidst Indi’s tough stance on cryptocurrencies, however, the government continues to exploreblockchain technology as a solution to many of its long-standing service delivery problems such as issuance of birth certificates.