We are already a leader in gaming of many kinds, we are already a leader in animation, we are already a leader in virtual worlds and having Blockchain and distributed leisure technology available to us for these purposes is going to be very useful as part of our growth and as part of our leadership in these new technologies. says Jayant Sinha, Chairperson, Standing Committee on Finance & Leader, BJP talks to ET Now at the India Economic Conclave.
We are talking about how the technology will evolve and shape the financial markets going forward. Now, technological innovations and regulations do not necessarily go hand in hand. Where do you see the role of regulations in VDAs and the Web3 technologies?
Where do you see the role of regulations in VDAs and the Web3 technologies?
New technologies always require regulation to evolve rapidly to deal with it. There is always a balance between regulation and innovation. As far as regulation is concerned, it is necessary because the government has to take into account the interests of all kinds of participants in various markets. Participants in many cases have to be protected against people who are doing illegal activities, the Ponzi schemes where people’s money is taken but not invested properly.
Second there is always a worry about a lack of level playing field and that there are some people in the market that have information that other people do not have and this economy is called information asymmetry and so it is very important to ensure that there is a level playing field for all participants in the market and that is something that only regulation can achieve.
There is a third reason why we have to have regulations and that is to prevent illicit use of various powerful technologies. For example, in the case of digital or crypto assets, it can be used for illicit financing both of criminal as well as terror activities. Those are the three or four important reasons why regulation is required.
We all know that innovation results in new use cases, new productivity and the way in which people can do things that they could not do earlier. As far as Web3.0 is concerned and as far as crypto assets are concerned, there are many many use cases that can be much more productive, much more powerful than existing ways of doing things.
For instance, today if money remittances are transferred across markets, in many cases, we are paying 3, 4, 5, 6% even as friction cost as cost to intermediaries when we do remittances. So if I transmit a $100 from the UAE to India, in some cases, I may pay $3 or $4 as commission on that with virtual digital assets and those remittances can be done very efficiently with very little friction.
So, instead of paying $3 or $4 in commission, I may be able to do it with 30 cents so about $0.3. That way we bring down the cost and make things much more efficient and much quicker through innovation. But again, even as we have innovation, even as things become easier, there are risks that one has to manage and that is the balance between regulation and innovation that is required. Policy makers have always done this and even with the internet for example when the internet started, new regulations had to be put in place about intermediaries and about the use of data and so on. So regulation keeps evolving because we need to make sure that the public interest is fully protected.
Now you are the Chairman of the Standing Committee for Finance. Can you allude to the recommendations made by the JPC for virtual digital assets?
We have not made any recommendations so far. We have done one hearing of various stakeholders that are associated with virtual digital assets and we had a very lengthy discussion with various different stakeholders. It was a very useful and productive discussion and this was in anticipation of the government introducing the Crypto Bill. Of course, the government decided to wait some more to do additional consultation with stakeholders before preparing the Crypto Bill and so we will continue our discussions with crypto stakeholders once the government has taken a position on crypto assets and brings in the Bill to regulate virtual digital assets.
Meanwhile, the government has introduced a taxation framework for virtual digital assets which was discussed as part of our Budget deliberations and of course the Budget for this fiscal year has been passed and instituted from April 1 onwards.
Crypto assets are important to Blockchain technologies as there are important use cases for that technology. There are news reports that the government is planning to regulate it. What is your opinion on the current stance by the government of not regulating the Metaverse or Web3.0? Can you give us some clarity on that?
I really cannot comment on the government’s policies and the government’s thinking on this. That would not be appropriate and we have to wait for the government to finish its consultation process and then issue either a white paper or a Crypto Bill which we can then discuss and debate. Hopefully if it comes to our committee, then we can evaluate in detail as well. We will have to wait for the process to play out.
In the meanwhile, there are very important use cases. I have already given the example of remittances. There are other important use cases for example in land records. For example, in smart contracts there are many different ways in which Blockchain and the Metaverse can play a very important role in India’s economic growth.
We are already a leader in gaming of many kinds, we are already a leader in animation, we are already a leader in virtual worlds and having Blockchain and distributed leisure technology available to us for these purposes is going to be very useful as part of our growth and as part of our leadership in these new technologies.
While India is a software superpower, we are still miles away from the Blockchain revolution that is happening across the world. How can we catch up? What is your take on this?
I would not agree with that. The fact is that we have many smart young people, many teams that are working on different use cases that are unique and customised for Indian conditions and many of those are already being scaled up and tried.
Of course there is no financial aspect to it right now simply because we have to come up with an appropriate regulatory framework for virtual digital assets but many different use cases are already being trialed and experimented with. We have the world’s third largest start-up ecosystem and many very well funded start-ups, I think that once the regulatory framework has been implemented, we will be able to bring in the financial aspect to it as well.
There are many use cases that do not actually require the financial part of it and they can be just applications or Blockchain technology just as smart contracts.
Do you see digital assets and NFTs as potential investment avenues in the future?
Absolutely. I do believe that in the future virtual digital assets and NFTs will be a very very interesting asset class because they will be linked to specific use cases that will make the existing solutions quite obsolete. For example, if you take NFTs’ ability to have a way of securing ownership of digital assets – for example if you have a picture which is a digital movie – then you can secure ownership on it using NFTs. If you have digital art of any kind, you can secure ownership of it. Iconic photographs, landmark photographs can be secured with NFTs. So there are very good use cases in the Metaverse that can only be secured and moved from one owner to another via NFTs.
NFTs are going to be very important as increasingly we spend more and more time in the metaverse. Already, we are spending so much time on smartphones or PCs, screens of various kinds and most people are spending somewhere in the region of three or four hours a day between TV, phones and other devices. That will increasingly move more and more into the metaverse where we will be able to undertake a whole range of much more interesting and exciting applications and once we are in the metaverse and spending four, five, six hours a day there, we will need to secure our property and digital assets.
For that, NFT are a fantastic application and people will need to do that and as you are in the metaverse, you will also need to be able to transact. You may want to buy certain experiences, digital art and certain properties that you would like to display in the metaverse and so we will need to transact and to be able to transact, we will need crypto tokens. That is what we do in the physical world.
So, increasingly as we spend four, five, six hours a day in the metaverse, we will need to be able to transact there as well. This is inevitable and it is going to be necessary. How that takes shape is going to be a balance between regulation and innovation. The role of different crypto tokens, crypto assets, the role of sovereign digital currencies is going to evolve overtime but the trends are inevitable. We will in fact be online in the metaverse for significant hours a day and we are going to need the full range of virtual digital assets, the full range of crypto tokens.