Crypto and Financial Inclusion: Sumit Gupta in Conversation with CII

The cryptocurrency sector has been making some serious noise since the lifting of the RBI’s banking ban in 2020. Not only did the possibility of this new asset class found a mass adoption within the Indian cryptocurrency community, but it also experienced easy and safe gateways through apps like CoinDCX. 

To talk about how the crypto space has been making rounds among the investors and how the Government of India is working towards bringing in regulations co-founder and CEO of CoinDCX, Sumit Gupta sat with the Confederation of Indian Industry(CII) on 7th July. Interested in learning where crypto stands in India? Let’s read along to find out!

How were cryptocurrencies like Bitcoin came into being? Why are Bitcoins popular?

It is the data intimation possibility that cryptocurrencies bring along that opened up this whole wide sector to the world, says Sumit Gupta. The simple ideation of data transfer between two individuals without the need of a moderator or a central body was how Bitcoin was born. 

Now, why is it popular? The basic reason why people exchange money is that they realize the value in it. If we all realize the value of something, it then becomes valuable enough to be exchange-worthy. Similarly, Bitcoin is a medium of exchange. Now we all have either seen or read how the whole world is adopting Bitcoin and deeming it as a store of value. So if something goes downhill, at least Bitcoin is there to save the day. That is simply the reason why in the last decade, we have seen such tremendous growth in Bitcoin’s value and the increase in demand that bitcoin has been looking forward to. 

Bitcoin is considered unanimous to cryptocurrencies. But it is not the only cryptocurrency available? 

Now that we have covered what Bitcoin is and how it came into being, let us now talk about Ethereum. It has often been pointed out that since we have Bitcoin, now that we understand what it is and how it works, why do we need Ethereum? To this, the answer would be, cryptocurrency is just like Fiat currency in this respect. Just like we have different currencies, like INR, USD, Pound, and so on, Bitcoin, Ethereum and other tokens are separate assets under the umbrella of cryptocurrency. 

All of the cryptocurrencies are based primarily on blockchain technology, but Ethereum is a platform. One can use it to build, connect and run decentralized applications. This is similar to how we use the internet to visit various websites. In simple words, Ethereum is a supercomputer, it is a platform, and people use Ethereum, on top of blockchain technology to build applications. 

You might have come across the ERC20 token; the protocol that people use to build their tokens. Tokens like BAT and various others were based on the ethereum blockchain. 

Where is Ethereum needed?

The native token within the ethereum blockchain is called Ether (ETH). Similar to how transacting Bitcoins brings in value, to be able to build applications or avail any computation within the Ethereum blockchain, one needs to use Ether or ETH tokens. The tokens are the medium of fees that the network uses. As more use cases and the various possibilities of the Ethereum blockchain are being explored, the value of Ethereum will keep on increasing. Every token; Bitcoin, Ethereum, Ripple; is different and has a different use case. Every token available today is catering to different real-world problems, leveraging blockchain technology. This is what we collectively call cryptocurrency. But one thing to remember is that not all tokens are a currency. While some of them are currencies, the others are utility tokens or CBDCs, and so on. 

Why do we need Bitcoin, when we have Fiat currencies? 

To put it in simple words, just like the information on the internet is so widely accessible, money is not. In the last decade, with just information being so seamlessly accessible worldwide, we as a society have come so far! Everything has become so seamless now. This is the result of making only information available across countries! But that is not the case when it comes to money. It is still difficult to transfer money from India to the US or from the US to Africa. 

Why is that? It is because every country has its boundaries or different exchanges, which makes it difficult to make a smooth transfer. Though people still avail the options available to them, it still takes days before the transfer is being made and it also costs a lot, to transfer the money from one country to another. 

Sumit Gupta says, “I feel that if we, as a society, can make this value transfer efficient and instant and cheap, the whole finance world will be far more advance.” “If I want to loan someone money in Africa and I understand that this person is doing a good job, I can’t do that right now. But if the transfer is very seamless, I can actually solve hundreds of problems that are not currently solved because the value transfer between countries is still very problematic.” Now cryptocurrencies like Bitcoin or CBDCs make this whole process seamless. The exchanges which we used to send money have many heads working from one endpoint to another and everyone is entitled to a salary. With blockchain technology at play, there is no need for that. It is a 24*7 operation that runs without a need for any individual and it is full-proof! “It just makes the value transfer far more efficient,” says Sumit Gupta. 

How are countries reacting to this innovation? Do we see a widespread adoption or do we see the banning of cryptocurrencies?

Adoption is a mass phenomenon, where there is a need to use a certain application on a day-to-day basis. Right now India is in a stage where the infrastructure is being built. For this transfer to happen, every individual is not required to adopt. We just need to build a solid infrastructure that runs the network. Adoption is happening and we have witnessed it. Few years down the road, we will be seeing a lot of blockchain usages within the daily apps that we use now. For example, the SMSs we receive will have a blockchain component. The information that one share with another, if it is not encrypted, blockchain will come in and make it more encrypted. This shift will happen, but gradually. 

The Government comes in when it is a matter of money transfer. This is where regulations become an important part. It cannot happen without the Government’s go-ahead. The Government also understands its utility and the savings that will happen if we make use of blockchain technology. Since the Government is also trying to understand the whole space, it might take some time for the Government to come up with a regulatory framework. A framework that the government is also comfortable with. Once the regulations are in place, a lot of organizations that are trying to bring in solutions will have the go-ahead, which in turn will bring in adoption. 

Will crypto become an integral part of our daily lives as the Internet?

Just as the internet is getting more and more valuable for our daily purposes, blockchain will complement that. It is making the data available on the internet more secure. One will continue to use the internet and blockchain will become an integral part of the applications that we currently use. We might not see blockchain on a day-to-day basis, but it would be a part of it. For example, while searching for a website, we do not pay attention to the HTTPS;// but we pay attention to the website we want to avail. Similarly, blockchain will be there, in the background, making faster browsing possible. 

When it comes to crypto, it is a token that takes care of the utility part of it. For example, if you are using a utility token that has value within the network, then you will be using a token to access that network. It is also used as tokens for investment to drive value. Every single token will have adoption and it will come after a lot of friction. 

How is cryptocurrency an asset class?

Various reports have already published crypto to be a good asset class. It is good to have cryptocurrencies in your portfolio to diversify it and also because it is one of the best-performing assets in the last decade. Though there are some risk factors, many reports have published that keeping 5% of one’s portfolio in crypto because of the upside that it has. Before figuring out one’s risk appetite, Sumit Gupta suggests, “Read a lot before investing.”  “I am a strong proponent of crypto education. The same reason why we have a free learning platform DCX Learn.”  Start investing with small amounts and then read on it. Investing without understanding is not a favorable path. Many use cases have seen investments that went down. To avoid such situations, it is always advisable to read a huge amount, research a whole lot, and then start investing.

The best return from this whole space is not just the monetary returns, but the knowledge you will get out of that. 

The Journey of Sumit Gupta to CoinDCX:

Sumit Gupta hails from the small town of Supri in Madhya Pradesh. He was always inclined toward mathematics. Problem-solving is something he enjoys. Later, he joined IIT-Bombay where cryptocurrency was a part of his curriculum, and lands his first job in Sony, Japan. It is there, around 2014 when he first heard about Bitcoin. 

His passion for entrepreneurship brings him back to India and soon he ventures into his own company. It was around that time, in 2016, when he came across Bitcoin for the second time that is when the idea of CoinDCX first sowed its seed. His earnest wish to do something different and be a pioneer of the possibilities that the future held lead him to cater to the problem of the crypto space. That was how CoinDCX came into being and is now the largest cryptocurrency exchange in India with over 3 million+ investors, as of June 2021!