CryptoTech Industry in India – A report by Nasscom and WazirX

By November 29, 2021March 22nd, 20228 minute read
CryptoTech Industry in India - A report by Nasscom and WazirX

Ever since the invention of crypto, it is absolutely fascinating to see what the world is doing with this technology. Emerging markets like India are making promising strides in this field. In collaboration with WazirX, Nasscom has prepared a report on the CryptoTech Industry in India, the details of which can be found here. This article aims at summarising the same.

CryptoTech Industry Overview

This section focuses on the components of CryptoTech, what technologies it is dependent on, and how industries have placed themselves at various stages of the value chain. 

The key components of CryptoTech are as under:

  1. Hardware and Data storage
  2. Identity, Authentication, and Security
  3. Infrastructure and Application Development
  4. Crypto-Exchanges
  5. Crypto Currencies
  6. Mining
  7. Enterprise Blockchain

The CryptoTech Industry Value Chain has been divided into various stages as follows:

  • Research and Development
    • Prototype
    • Development
  • Design Commission
    • Chip manufacturer
    • Development
  • Software
  • Testing
  • Integration
  • Final Product
    • Testing and Inspection
  • End-User
    • Peer-to-Peer Payment
    • Remittance
    • Retail
    • E-Commerce
    • Others

The CryptoTech Industry can truly flourish with interdependence on other emerging technologies, including the Internet of Things (IoT), Blockchain, Cloud Computing, etc. The technologies required will depend on the purpose and functioning of the CryptoTech infrastructure:

  1. When it comes to transactions stored on the cloud/data centre, Data Management will be an important feature where the following has to be ensured:
    1. Improving standardization
    2. Privacy
    3. Security
    4. Scalability of Data
  2. With respect to transaction details on the distributed ledger, Identity Management would have to be achieved by using:
    1. Authentication via a Blockchain-Based Identity
    2. Encryption
    3. Digital Signatures
  3. For the successful completion and execution of transactions through smart contracts, the Transaction Management should be optimized by:
    1. Automatization via Smart Contracts
    2. Decentralized Micropayments
  4. The Industries of the future would essentially have Smart Consumers/Users who are ‘smart’ as a result of:
    1. Autonomous agents (e.g., sensors, cars, other IoT tech)
    2. Digital Twin leveraging IoT, Blockchain & Cloud
    3. Making Autonomous Decisions

CryptoTech Industry Global Evolution

One might assume that CryptoTech is a relatively new technology that cannot be more than 10-15 years old. However, the report has provided an Evolution Timeline for CryptoTech starting all the way back from 1983 when Digicash was implemented to June 2021, with El Salvador becoming the first country to accept Bitcoin as legal tender.

Despite the terrible impact caused by the 2008-09 Sub-Prime crisis, it is believed to be a catalyst for the development of CryptoTech. With the Sub-Prime crisis in 2008, the government bailout scheme for the Lehman brothers, the artificial printing of currency, and inflation in Zimbabwe and Venezuela, people wanted to steer away from the Tradition Transaction Privacy Models where a trusted third party (like banks, financial institutions or government) was essential for carrying out transactions and move towards the New Age Transaction Privacy Models which did not need a third party or was decentralized. 

Even the Covid-19 crisis has led to a boom in the adoption of technology, especially CryptoTech, with the following trends observed:

  • The Global CryptoTech Industry is expected to cross $2.3 Bn by 2026
  • Global Banks buying Crypto
  • Banks owning Blockchain-based Systems
  • Corporations accepting Crypto

Worldwide, CryptoTech is being observed to be transformative in the areas of eGovernance and Public Health:

  • In Columbia, the use of a CryptoTech-based e-Procurement solution showcased Government transparency and reduced corruption. Further, a blockchain-based system of voting helped it to achieve Digital Democracy.
  • In the United States, a CryptoTech-powered Intelligent Healthcare network allowed citizens to carry out Transparent Healthcare Transactions.
  • In Moscow, Russia, the use of a CryptoTech-based Hyperconnected digital platform helped in building their Smart City.

Trends in CryptoTech Industry

The report has identified 7 key trends that have driven the growth of CryptoTech. This is expanded below:

1. Bitcoin as Digital Gold:

The penetration of Bitcoin has been observed to be faster than that of the Internet, with 3.9% of the World’s population owning some form of cryptocurrency. Bitcoin is also the fastest asset to reach the $1 Trillion mark in terms of market cap, making it the fifth-largest currency by market cap.

2. Smart Contracts – Ethereum:

It has been found that there are at least 20+ countries that are testing or deploying smart contracts in the public sector. The Global Smart Contract market is growing at 18.1% and is expected to reach $245 Million by 2024. At least 32 companies are known to be building on Ethereum or Enterprise Ethereum blockchain platforms.

3. Decentralized Finance (DeFi):

$85 Billion is the Total Value Locked (TVL) in Decentralized Finance. The following have proven to be Adoptive Indicators of DeFi:

  • Traditional Financial Products in DeFi market
  • Monetization of Blockchain gaming
  • Cross-Chain Technology to Scale
  • Decentralized Exchanges (DEXs)
  • Governance tokens become more important

4. The Wave of Tokenization:

It is the process by which Primary Account Numbers (PAN) are replaced with surrogate values called tokens. The adoptive indicators of tokenization are:

  • Contactless Payments
  • A rise in the number of financial frauds and data breaches
  • Enterprises facing an increasing need to adhere to the stringent regulations
  • The proliferation of cloud-based tokenization solutions and services

5. Non-Fungible Tokens (NFTs):

There is a $ 350 Million market for NFTs that are widely being used as art, collectibles, and even in the gaming industry, which shows that NFTs are on track towards mainstream adoption. 

6. Rise of Crypto Capital:

Crypto Capital is fast emerging as an alternative source of funding for VC investments. Further, the adoption of 5G would mean the reduction of current financial bottlenecks and the enhancement of blockchain-powered decentralized projects.

7. Increased adoption of Central Bank Digital Currencies (CDBCs):

CDBC is the legal tender issued by a central bank in a digital form. The majority of Central Banks all over the world are either actively researching the potential of CDBCs or experimenting with the technology in some form. 

CryptoTech Industry Landscape in India

The crypto scene in India is relatively new but is picking up pace quickly. There are 50,000+ people employed in CryptoTech. CryptoTech assets have fetched an investment of $ 6.6 Billion by retail investors in India. Further, the 230+ multiple crypto startups with their 150+ Blockchain and Crypto projects/proofs-of-concept (POCs) are a definite indication that CryptoTech is here to stay. 

Where the technology sector has witnessed revenue growth of 10-11% in the last 2 years, the crypto sub-sector has seen revenue growth of 40-50%, making it grow at 4x the pace of the tech industry in general. During the same period, Crypto Startups have also seen an 8x growth in funding. The retail ownership of Crypto Assets has also seen a growth of a whopping 612%!

One will also find multiple examples of companies that are Crypto Exchanges, Crypto Start-ups, IT firms offering Blockchain/CryptoTech related solutions, Financial Institutions that are Crypto (Remittances) Adopters, and also examples of adopters of CryptoTech in the Public Sector.

The Crypto Exchanges have undergone an evolution in a short amount of time. If we have to look at WazirX in particular, it has observed a new class of investors – those aged between 18 to 35 years that make up for 75% of the total crypto investors. What is even more astonishing is that 70% of this young population have never traded in the stock market before! 65% of women who have signed up hail from tier-II and tier-III regions. They even promote financial literacy and knowledge dissemination through various programs. Further, the NFT platform showcases artwork across various categories, thereby helping promote artists and creators.

A majority of State Governments are also adopting CryptoTech through multiple use cases such as Remittances, Digital Identity, Electronic Health Records, Digital Identity/ Certificates, Rationing, etc. Further, the Government of India has also started adopting the Distributed Ledger Technology in areas like the implementation of Port Community System (PCS), recording and monitoring of covenants of non-convertible securities by depositories etc.

Potential Benefits of CryptoTech in India

At present, there is very little regulatory framework in the crypto space, which is causing relatively slow growth and adoption of CryptoTech. However, after a series of interactions with industry participants, stakeholders, and modelling exercises, it has been assessed that the best-case scenario for CryptoTech in India would attract greater investment, promotion of innovation, and grass-root adoption of crypto technologies. Further, there would also be a heightened awareness of its benefits.

Extensive research has also unveiled that as a result of CryptoTech, India can create a potential economic value addition by the year 2030 in the following forms:

  • Increased investments to the tune of $ 105 billion
  • Reduced Remittance costs resulting in a savings of $ 79 billion
  • Creation of 800K+ jobs
  • Tax collection of $ 137 million

The report has also focused on 4 case studies on how CryptoTech has been used in India:

Case Study I: India’s First Electronic Health Records on Blockchain:

This case study focused on how the Government of Rajasthan partnered with the Auxesis Group to create a Digital Health Use Case for Blockchain. Blockchain technology has been used for Digital Health Records, Pharma Track and Trace, Drug Provenance, and Physician Recertification.

Case Study II: Digital Identity through Blockchain Diploma Certificate Issuance and Verification System:

The Maharashtra State Board of Skill Development (MSBSD) approached LegitDoc to automate the process of issuance of student certificates and verification. This solution has reduced the time taken to issue Student Certificates from 3 to 4 weeks to < 1 week. The number of people needed to coordinate for the issuance of certificates was also reduced from 1122 to just 2 or 3 people. Further, the time taken to verify the certificates was also reduced from 4 to 5 weeks to just approximately 10 seconds.

Case Study III: India Trade Connect – a Blockchain-Based Network for Trade Finance:

7 Banks have signed up for a Pilot on India Trade Connect, which is a domestic trade finance blockchain-based network that enables automation, allows transparency, and improves risk mitigation in domestic trade and supply chain finance operations. The use of this network has resulted in a reduction of average cycle time for inland letters of credit from 8-9 days to just 2-3 days. It has also reduced inefficiencies, hidden costs, document courier fees, and the average per-transaction cost.

Case Study IV: Remittances Pilot through Ripple:

5 to 6 banks have signed up for Pilot on RippleNet, which aims to improve Cross-Border Remittances by reducing the average time taken for an international payment transaction and the average fees on principal value. This has the potential of saving $5 to $6 billion on remittance fees.

CryptoTech in India – The Way Forward

For India to lift its wings and soar in the area of CryptoTech, it has to first overcome certain key impediments with certain areas requiring priority intervention. The report has identified 4 types of bottlenecks, namely, Technological Bottlenecks, Operational Bottlenecks, Financial Bottlenecks, and Regulatory Bottlenecks. 

NASSCOM also provides a few recommendations for the crypto scene to achieve lift-off:

  1. Proactive, Consultative Approach
  2. Crypto Working Group or Self-Regulatory Body
  3. Regulatory Sandbox
  4. Contemporizing Laws as Technology Neutral Frameworks

Appendix

The report’s appendix contains various case studies in places like Colombia, Ukraine, USA, India, Moscow, Austria, and other global examples where the adoption of CryptoTech has been successful. It also contains examples of regulatory governance from countries like Cyprus, Singapore, Indonesia, and Malta, touching upon the various aspects covered in their respective legislations.

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
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Tarish Vasant

Tarish Vasant

Tarish Vasant is a Chartered Accountant who believes that the typical role of a CA has to be reinvented to suit modern times. He has been writing in the field of finance and taxation for 3 years now and has decided to take the plunge with crypto too. He defines his journey as: "Coining my bit, one word at a time."

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