Greetings from Emergents @ Weild & Co, and welcome to Emergents’ Bytes, where we dish out quick and original takes on what we’re seeing in the blockchain and digital asset markets.
FYI - we scrapped “Emergence” and decided to replace it with our company name, “Emergents” (We know, big difference) 👻
Here are the topics we’re biting into this week:
🧐 Is India Ready to be the Next Frontier in Crypto?
💸Industry Capital Activity
💥Impact
📝 Weild & Co Activity & Insights
🎧What We’re Listening To
🎟Events We’re Attending
Is India Ready to be the Next Frontier in Digital Assets?
Until March 2020, the Indian government criminalized the buying, selling, and custody of bitcoin or any other digital asset. As a result, consumer digital asset adoption in the world’s second-largest country was virtually non-existent. All that changed in March when the Indian government lifted the long-standing ban, thus officially thrusting the world’s fifth-largest economy by GDP into the digital asset landscape. Now that the metaphorical floodgates are open, it appears the country is ripe for digital asset adoption.
In this article, we break down the current state of digital assets in India. This overview covers the top companies in the Indian blockchain ecosystem, the institutional investment landscape, public sector activity, the regulatory environment, and DeFi adoption to answer the question: Is India ready to break out into the global crypto scene? And if so, which companies will lead the charge?
Note: Big thanks to Akshay Argawal, Founder of Blockchained India and Blocumen Studios, for his contributions to this article.
Indian Public Sector and Regulatory Activity
India’s public sector has emerged as a large consumer and driver of blockchain technology adoption. According to the NASSCOM India Blockchain Report of 2019, 50% of all Indian states are building and deploying blockchain projects. Some examples of these initiatives are listed in the graph below.
Image courtesy of NASSCOM Avasant India Blockchain Report 2019
All these initiatives mentioned above are commendable -and are sure to be relevant in the long-term relevance- but most projects have not surpassed the POC stage. And not surprisingly, these initiatives have done nothing to position the country to be the next frontier in digital assets.
Under the Digital India initiative, and on the heels of the controversial demonetization event of 2016, platforms such as Paytm (over $10 bill valuation), GooglePay, PhonePe, etc have achieved massive adoption. While we view this is an impressive start towards digitizing India’s financial system, these companies have not solved global payments and remittance, which is a $700+ billion opportunity globally.
Furthermore, it appears crypto companies are taking notice. In June 2020, San Francisco-based cryptocurrency and software firm Ripple published a policy paper outlining their recommendations for legalizing and regulating cryptocurrencies in India to foster responsible innovation and protect consumers.
Emergents’ take: Friendly government regulations and global support from major crypto firms will inevitably lead to the widespread adoption of digital assets in India.
While these government blockchain POCs are good-intentioned, they ultimately don’t move the needle. We think the government needs to promote blockchain technology for its obvious value proposition: payments and remittance. The Reserve Bank of India (RBI) should build a forward-looking legal framework that allows cryptocurrency companies to operate and contribute to the broader economy to maintain its competitiveness on the world stage and drive global cryptocurrency adoption.
Indian Crypto startups - we’re looking at you.
India Crypto Startup and Investment Activity
According to our colleague Akshay Argawal, digital asset trading activity has skyrocketed 2.5x in the last four months. And major crypto investors have taken notice; CoinDCX recently received $2.5 million from the likes of Polychain Capital and Coinbase Ventures. In addition, Binance first acquired then teamed up with India’s biggest crypto exchanged, WazirX, to create the $50 million Blockchain for India fund. The initiative will invest in fiat-to-digital assets gateway solutions, trading platforms, payment, and remittance solutions, digital asset wallets, DeFi platforms, and decentralized applications.
Emergents’ take: Top crypto investors are clearly bullish on India as a huge growth driver for the industry. Despite this recent attention, Blockchain and crypto amount to a very low percentage of total ndian venture capital investment. Google is investing $10 billion for increased adoption of digital services and Sequoia announced $1.35 billion venture and growth funds for India, but at this time, very little is earmarked for blockchain and crypto allocations. If only a small percentage of those funds are allocated towards digital asset innovation in India, we anticipate a massive uptick in digital asset adoption.
Is DeFi The Ultimate Catalyst For Digital Asset Adoption?
In late June, Decrypt released an article providing an overview of the Indian DeFi scene. The author explains DeFi’s potential to provide critical financial services, such as lending, borrowing, and depositing, to hundreds of millions of unbanked or underbanked Indians. If this is even partially accurate, DeFi should be a seismic catalyst for Indian crypto adoption.
According to DeFi pulse, two of the top 25 companies in the space are based in India: InstaDApp and Nuo Network.
InstaDApp, in particular, has made tremendous progress. The platform has grown almost 4x in less than one year, which we believe bodes very well for the long-term adoption of digital assets. As of July 21st, InstaDapp is the 7th largest DeFi project in the industry, and fourth in the lending space. Another prominent DeFi company in India is Nuo Network, which as of July 21st is the 22nd largest DeFi project
While DeFi is still in its infancy (In India and globally), many believe it can be the single biggest catalyst for not just crypto adoption, but for financial services as a whole.
Barriers To Adoption Remain
While it appears the country is moving in the right direction, two key barriers remain: COVID-19 and a potential new ban on crypto assets.
According to another NASSCOM report titled “Start-Up Pulse Survey – Q1 2020: Reviving The Indian Tech Start-Up Engine During COVID 19”, 70% of Indian startups and SME’s have less than three months of runway. Therefore, it is entirely possible many crypto startups won’t survive long enough to achieve critical mass.
Unfortunately, the Indian government is mulling a new ban on crypto assets. According to an Economic Times article from June 12th, a July 2019 legal framework was proposed that would impose even stricter restrictions on the ownership of digital assets. While the original ban was based on an April 2018 circular from the RBI, this new proposed framework would be brought to a vote by the country’s Parliament, which in effect would install a more permanent ban on crypto activity.
If this framework is adopted, all of the progress to date would effectively disintegrate.
Our Conclusion
India is primed for widespread digital asset adoption. Legacy crypto companies such as Ripple are helping craft favorable regulations and may capture the Indian remittance market as a result. We’re seeing investors such as Polychain and Coinbase allocating capital into the ecosystem. DeFi is beginning to blossom in a country where half of the country’s 1.3 billion citizens are unbanked or underbanked. All of these trends seemingly align with the government’s ambitions to digitize India (as laid out in the aforementioned Digital India Initiative). And according to Akshay, crypto asset trading and ownership have increased 250% in the four months since the crypto ban was abolished, signaling unmet demand for digital asset products.
What’s also clear is the Indian government is not sold on the benefits of crypto.
Bottom line - as we believe government approval is a fundamental prerequisite to the growth of the entire ecosystem, if unfriendly regulations prevail, India will miss out on the single biggest financial opportunity in a generation. And the world will need to look elsewhere for digital asset adoption and innovation.
India is critical to the growth of the entire ecosystem. If India is not a participant in this new financial system, it will set back global adoption for many years.
💸 Capital Activity
Japanese financial conglomerate SBI bought a minority stake in London-based cryptocurrency market maker B2C2 for $30 million. Here is an excellent thought piece from B2C2 Founder Maxime Boonen on the strategic partnership.
Arca announced the Arca U.S. Treasury Fund, the first SEC-registered fund to issue shares as digital securities. This product's importance lies in the various financial asset use cases of ArCoin, including cash, treasury management, interest payments, collateral, and lending. This is a prime example of real innovation within (and despite) regulatory constraints.
New York Digital Investment Group (NYDIG) quietly raises $190 million for its Institutional Bitcoin Fund, which is one of three funds the group manages.
Another sign of traditional tech investing into DLT with VMware joining Digital Asset’s Series C round along with Salesforce and Samsung.
Worthwhile Industry Pieces
For those curious to understand why so many believe in this new Digital Asset Market, read Placeholder Capital’s A Superior Financial System.
Debunking Common Bitcoin Myths by ARK Invest. Self-explanatory.
💥 Impact
We continue to believe that all emerging technologies will converge sooner than expected. This piece by CoinTelegraph and VeChain dives into how blockchain and IoT will improve food safety.
In this article, Patrick Murck and Linda Jeng give a glimpse into how, through meaningful self-governance, the adoption of a digital dollar can not only make payments more efficient but also lay a robust digital foundation for economic growth and innovation.
📝 Weild & Co Activity & Insights
Our Weild & Co. friends at Architect Partners shared their thought leadership by breaking down the deal, why it’s essential for the evolution of the overall digital assets industry, and how it sets the stage for increased M&A in the crypto and blockchain space.
🎧 Podcasts We’re Listening To
Pomp Podcast Episode 336: Grayscale CEO Michael Sonnenshein - Learn more about Grayscale, the company responsible for the world’s largest publicly-traded bitcoin product (GBTC)
Epicenter Episode 348: Richard Craib of Numerai - The Epicenter team expertly breaks down the Numerai, the “world’s open hedge fund”
We loved this episode of On the Brink featuring Caitlin Long, where the Castle Island Ventures’ team covers Wyoming’s progressive crypto regulatory framework and how Avanti bank bridges the gap between bitcoin and traditional banking.
Pomp makes our list once more with an insightful interview of Hutt Capital’s Brooke Pollack, where they deep dive into the crypto fund-of-funds model.
🎟 Upcoming Events We’re Attending
Singapore Blockchain Week: Jul 21-23
DLT and Cryptoassets 3.0 hosted by Aaro Capital: July 23rd
Global DeFi Summit: Aug 6
LA Blockchain Summit: Oct 6-7
Please use this Feedback Form to provide suggestions and give constructive criticism!
About Emergents @ Weild & Co 💪
We are tech investors, wall street veterans, blockchain enthusiasts, and university professors focused on providing comprehensive investment banking and tokenization services to innovative issuers.
We are one of only a few i-banks in the world that believe in and work with blockchain-enabled assets.