Important to build robust, comprehensive framework to regulate crypto space: Koinex CEO

Cryptocurrencies have gained a lot of traction and acceptability among market participants. India is becoming one of the biggest trading hubs of cryptos and things will only get bigger once lawmakers lay out a clear regulatory framework for this space. Like equities, investors in the crypto space must understand what they are buying into and what value/utility proposition the digital tokens hold in the longterm, says Rahul Raj, cofounder and CEO of Koinex, India’s leading cryptocurrency exchange. Excerpts from an interview.

Your thoughts on what the Finance Minister said about cryptocurrencies in his budget speech: Do you think he has killed India’s cryptocurrency party?

A: The Finance Minister’s comments were leaning towards the need for a regulated framework for the digital currency ecosystem, rather than a complete ban. This was corroborated by Economic Affairs Secretary Subhash Garg in his statement about India hoping to roll out a regulatory framework before the end of this fiscal year. The government, in fact, has replaced the idiom cryptocurrency with crypto-assets, referring to possibly treating it as a commodity under SEBI guidelines. The government is focused on mitigating all possible illegal financing activities which could revolve around Bitcoin and we are in agreement with this thought. It is important to build a robust and comprehensive framework to regulate this space.

Jaitley said India wants to promote the use of blockchain technology but reaffirmed a negative view on crypto-assets. Do you feel that thinking of blockchain independently of cryptocurrency transactions is redundant at the moment?

A: Blockchain technology is a huge technological breakthrough and is evolving every day. If you see how blockchain functions, it is by design, applicable across sectors that use recording and updating of data. So applications of a transactional nature will always be one of the foremost users of this technology — and so we do see crypto-assets as being an integral part of the blockchain universe. However, the technology will also find relevance in various other industries, including advertising, retail and social media, and government sectors like property office, electorate office, judiciary, etc.

Many Indians are trading on your exchange. On some days, volumes in Ripple are the 20th largest globally, according to coinmarketcap. com. What makes you bullish about the future?

A: As per industry sleuths, in the last 18-24 months, $3.5 billion of trade volumes have been recorded in India. It accounts for over 10 percent of the global Bitcoin trading volumes. With the conversations regarding the regulatory roadmap going forward, we are optimistic about the market and find a scalable business opportunity as a lot more participation is expected on the retail front.

While registering on Koinex, there is a thorough KYC process. What challenges do you see going ahead, especially with respect to your payment partners?

A: We were the first openbook, peer-to-peer cryptocurrency exchange (launched in August 2017). We were also the first to deploy a thorough KYC system... We need users to upload their PAN details, Aadhaar details, and their picture (which is verified using image mapping). Our payment systems were running smoothly, but we did face a few hiccups in the light of the recent apprehensions of the government. But we hope that when policymakers lay out a clear regulatory framework, the financial institutions will be open to partner with us. In terms of what more can be done, there can be a multi-tiered KYC process where we can categorise users in different groups such as HNIs, high traders or politically-exposed individuals. We have also launched our Koinex app to help users trade on the go.