Money is a medium of exchange and it has gained acceptance because it is a social construct. Blockchain as a technology is over two-decade old, whereas its use case as a currency is striving for acceptance. Cryptography enables secure communication in the presence of adversaries. The unabated expansion of cryptocurrencies and its exchanges in the last eighteen months is responsible for 90% of the total crypto investor base in India. As part of the industry engagement initiative, ET Catalyse hosted leaders from the Indian crypto ecosystem.
Legacy financial institutions connect the seeker and provider of money. In return, these giants collect fees from both parties. To better understand the current financial system, let us take the example of an hourglass. When the grain of sand moves from one end to the another, it passes through a thin portion in the middle. Contemporary financial institutions are strategically stationed in the middle to collect grains of sand. Cryptocurrencies and Decentralized Finance (DeFi) have different plans.
Follow the Money
Interest in cryptocurrency is coming from all quarters. And, such interest is justified. Investors are looking for the next big thing and some are keen because of fear of missing out (FOMO). Regulators, enforcement agencies and the government see any cryptocurrency as disruption to the status quo and interference in the functions of a sovereign state. Seasoned investors have labelled cryptocurrency as a money laundering tool, while new-age investors look at it as an asset class.
ET Catalyse webcast highlighted that investors acknowledge the high-risk profile of crypto assets. Most of the investors are aged between 20-32 years and they are yet to witness a sharp correction in the market. Investment in any asset is a mix of fundamentals and perception. At the moment, perception about crypto as a long-term bet is fuelling curiosity and volatility. Another important fact about the recent spurt in crypto mania is the untapped market in non-metro cities in India. This adds an aspirational dimension to the India crypto story.
In all the noise around crypto, there is an undeniable fact about disruptive technologies. Start-ups are more willing to ask for forgiveness, while incumbents often need to ask for permission.
Crypto Marketing Landscape in India
Absence of a regulatory framework leaves a vacuum for compliance monitoring in the cryptocurrency space in India. Market players are trying to persuade the prospective investors with the help of celebrity-led, expansive advertisement campaigns. To some extent they have been successful in generating interest which has translated to an increasing number of active users on a given platform.
Traditionally, the Indian investor is conservative and extremely risk averse. In the coming years finance and banking regulators are expected to formulate a clear blueprint for the crypto products. Until then, the market will expand due to referrals.
Bridging the gap between investor interest and their knowledge about crypto products is the biggest challenge for this emerging industry. Working with regulators such as Advertising Standards Council of India (ASCI) will be mutually beneficial. All the stakeholders shall be invited to register their views and special emphasis shall be given to investor sentiments. Misleading campaigns shall be penalised and all forms of consumer outreach shall be accompanied with a risk disclaimer.
More Questions than Answers
A question on most people’s mind is ‘whether cryptocurrency will replace or co-exist with fiat currency’? Ploughing real money to purchase something that may turn in to trash in the future is not everyone’s cup of tea. A sensible approach for crypto platforms in India would be to educate and acquire new users. A perception middle ground must be achieved in order to address investor concerns.
A generation which has attained adulthood in the last two decades is understandably the dominant demographic group for crypto products in India. The gamification of finance has got millions of 20-30-year-olds hooked to their smartphones and both the user base and trading volumes are scaling new heights every quarter.
Industry insiders are mindful about the potential leaving an imprint on the consumers who consume information in regional languages. People living in non-metro cities/towns have good disposable income but lack avenues to spend. Low cost of living in smaller towns helps their cause even further. The next wave of investors shall come from community building programmes. Crypto providers must reallocate some of the marketing funds from metro cities to untapped markets.
The growing crypto developer base in India is a subject lost in conversation. Expectations of unprecedented returns gets a lot of attention, but the promise for other applications is not finding reasonable space in public discourse.