February 7, 2022
Anshul Dhir’s experience as a serial entrepreneur and an early-stage investor spans over 16 years, dedicated to building companies across web 3.0 and blockchain, financial markets, real estate, alternative investments, fintech & technology, Internet and Media. A Gold Medalist from India’s prestigious business school XLRI Jamshedpur, Anshul is also certified in Bitcoin and Cryptocurrency Technologies from Princeton University. Recently, he was inducted into the prestigious list of Entrepreneurs 35 under 35. He is currently the Co-founder & COO of EasyFi Network. We ask him a few questions on India’s upcoming digital currency, Digital Rupee.
BAR: Can you tell us a bit about the interoperability between the RBI digital currency and crypto assets in the future?
AD: Open and interoperable systems between the Digital Rupee and crypto assets are essential for expanding opportunities for both sides of the market spectrum – the decentralized one as well as the traditional ones – financial or any other businesses for that matter. It is my belief that with interoperability, a CBDC like the Digital Rupee will only end up complementing the crypto industry rather than compete with it.
See, we have to be clear on one aspect in order to enjoy the benefits of a crypto asset. The end consumption will always have to be in the sovereign currency i.e. a legal tender – in this case, the Digital Rupee. Businesses, governments, societies and individuals will immensely benefit if there is a bridge between CBDCs and the blockchain-powered decentralized industry – which currently are all crypto-based. I am not limiting this to just the traders – this includes payments, investing, lending infrastructures, the growing NFT industry, metaverses and so many others!
An interoperable digital currency will also have far-reaching consequences for the growth of Industries. Let’s look at the DeFi space for example – there are already multiple TradFi products and services that are making inroads. Imagine a scenario where a digital fiat currency has an on-ramp and off-ramp on DeFi lending platforms. That will unleash a new line of liquidity for those who are seeking to earn a yield from their deposits or borrow money for something. This will also open doors for new startups who are entering this space and for innovation in the blockchain space in a large number of industries. We do expect the Government of India (GOI) to have this vision of all-around growth of these industries – hopefully we will get to see more clarity coming in soon.
BAR: Is the 30% tax rate too high given given Thailand has scrapped its own 15% after its impact on the crypto industry?
AD: At this point in time, it is too early to comment on the rates and the effect it will have on the crypto industry. One should not compare the two countries. The demography, size, and fiscal behavior of the Thai crypto community are very different from that of India. The Thai government was also more savvy and progressive and had created rules for crypto much before the RBI put a moratorium on banking services to cryptos.
So in my opinion, any rule is a good rule for the crypto community in the country. At least we got a start with a tax regime. We still need a lot of clarity on how this tax rule will work for the various scenarios of decentralized trading and investing; there are so many scenarios that need to be understood for fiat-to-crypto, crypto-to-crypto trades and investments, holding, payments and many others.
The industry needs clarifications and time to settle down to this regime, even before we can estimate the consequences of this rate. I am sure the authorities will come up with many clarifications.
BAR: So far the crypto industry has welcomed the move? Do you think they believe the latest budget does recognize crypto asset even though the government officials say that it is far from being “legalized”?
AD: Yes, most have welcomed the move, but there are mixed reactions. At least cryptos are not being unilaterally banned as was being predicted by many. This is indeed a welcome step as now the GoI has recognized this as an asset class worth taxing and finally bringing it under the tax structure of the country with some rules put in place. We have come a long way from the days when a draft bill recommended a 10-yr jail term for those who possessed crypto-assets!
This classification has now given a clear path for the authorities on how to treat these new instruments. We also believe that this recognition will slowly and steadily reach a point where we will have proper regulatory oversight and eventual law to govern this industry.
BAR: Finally, does India need a digital rupee, and are there any better ways of doing it rather than on blockchain as some say?
AD: Any forward-looking country that aims to be a digital-first nation needs to move in this direction – having a blockchain-powered centralized legal tender. It is essential to understand – a Digital Currency that is issued by a Central Bank i.e. a CBDC, is structurally not any different from a centrally issued fiat like the Rupee.
A CBDC will bring many benefits with it; for one, it is a blockchain-powered, blockchain-secured tokenized money. We have seen how blockchain changes the functioning to more transparent systems, improving efficiencies, removing the need for intermediary costs, reducing the cost to cash management as well and more…
Hence, the Digital Rupee will improve the Indian traditional monetary systems by infusing greater efficiencies in our banking systems, in payment and storage mechanisms, inculcate efficiencies in our fiscal policies, promote higher amount of transparency in all systems and curb cash transactions as much as possible.
Above all, it will bring down the costs of cash management; please understand, cash in the wallet is an expensive proposition – the government spends a huge sum of money to print and produce physical currencies, store, distribute and finally provide security for it.