There are two ways to resolve an argument. The harder one endures
Hitting the weak nerve – you just want to control (cough, cough – bully) we or you do not understand us– is now becoming boring. It was never fair, to begin with, especially for players who espouse the basic spirit of transparency and trust with crypto-technologies. What if we raise the argument? What if we put our toes, and even socks, on the other side’s shoes? Coinatory continues its series of Rogerian interviews. This time we have Zac Cheah, CEO, Pundi X who pulls no punches but plays the gentleman’s game as well. He stares at the issues that build the path for regulatory bans and confronts them with some thought-provoking shovels.
Are the concerns of governments right when they oppose crypto-currencies? Are they wrong in worrying about investor safety, money laundering, no intrinsic value, illegal activities and economic stability?
Fear of losing control of tracking criminal activities, taxation, and lack of knowledge about the blockchain technology results in the act against crypto. Before the government gets ready to regulate crypto, some companies in the crypto industry have already taken a self-regulated approach to protecting consumers as well as for better compliance. The blockchain technology itself enables transactions completed in a trustless environment, which gives value to the objects that people are transacting. In some countries, crypto-currency brings an alternative way for people to keep the value of their assets due to the unstable monetary system. This will make crypto more acceptable.
How do we explain the security and investor protection aspects in light of the spree of exchange hacks, forks, volatile ups and downs and token scams seen in the last two years?
Regulators are put into a difficult position of balancing interests: they have a duty to protect the interests of their citizens and, at the same time, they are, for the most part, incredibly supportive of innovation – and particularly innovation that can improve the lives of their citizens through financial inclusion, more efficient and responsive government, controlling corruption, etc. And while Blockchain is not a panacea, it is providing a platform that can deliver great benefits to society.
Having said that, the future now looks optimistic as regulators, with the help of the industry, are finding ways to balance between controlling abuse while at the same time not stifling innovation – or innovative ways of fundraising
To name a few countries who overhauled their approach towards crypto-currency, we could look at Indonesia who, earlier banned crypto but, now recognises Bitcoin and other digital currencies as a trading commodity. Even China banned cryptocurrency when it was first introduced but is now using the technology to develop for their own digital currency which they believe will support their currency’s circulation and internationalisation.
Regulatory bodies can take cues from countries that are using digital currencies to their advantage and finding ways to control them. Blockchain has given rise to so many projects with so much potential. Its applications are wide and organisations are now getting privy of that. Blockchain technology has begun to empower industries with its countless benefits and is radically transforming them.
What were your top three or four observations and arguments when you read the ‘Banning Of Cryptocurrency & Regulation Of Official Digital Currency Bill’ – anything that the government should take into cognizance too?
India is a hotbed for startups, they form the backbone of the economy and over the years we saw a lot of innovative crypto startups mushrooming in the country. There is immense scope in this sector and could have helped the economy on the growth trajectory if it had regulatory support. In spite of the resistance, we have seen an uptake on our digital wallet supported by the blockchain technology in India. This explains the demand of Indians towards new technology and their willingness to experiment and remain at par with their global counterparts.
Cryptocurrency is the most popular application of blockchain technology and will play a revolutionary role to change the financial industry. I think the government could further encourage and cultivate innovation in India by strategically facilitating blockchain in the country.
Would the proposed concept of Mintettes be helpful to have something that ensures regulatory protection but also offers anonymity?
To receive regulatory protection, especially from the central government, we will be asked to give up anonymity to the government. That’s inevitable. If the token issuer can be self-regulated, it will give users a peace of mind as the spirit of the blockchain technology is collaborative and community-driven so that it can flourish in a decentralised and trusted environment.
When the report talks about allowing research in crypto or making room for Distributed Ledger Technology (DLT) apps in the financial sector, is that encouraging?
Blockchain technology offers a wide array of applications. Banking and finance are prime for blockchain as it is best suited for the requirements it poses. We are a blockchain company and are constantly applying the technology across industries for better processing, security and streamlining. We believe that blockchain has great potential to transform industries.
While India has banned crypto-currency, the proposed bill states that the underlying technology (blockchain) has several potential applications. Hence, allowing research in digital currency offers an opportunity for blockchain enthusiasts. The Bill also states DLT makes it easier to identify duplicate transactions and therefore can be utilised for fraud-detection, processing KYC requirements, and claim management for insurance. Further, it can be helpful for removing errors, frauds inland markets, if used for maintaining land records. These are all the challenges that blockchain can address and it gives a ray of hope to companies like us to stay relevant in the market.
Would the recent Financial Action Task Force (FATF) rules be a good drift?
To fight against money laundering, FATF will establish a global database to collect and share personal data on individuals using cryptocurrency. I believe this will speed up the adoption of crypto-currency as leaders of G20 step up, take measures and make sure this crypto-currency can be used in a good cause.
What happens to your strategy if the Indian report proposals go through and crypto is actually criminalised here?
At Pundi X, we continue to respect the position and stance that certain governments hold with regards to Blockchain and Cryptocurrencies. There are governments that validate the use case for cryptocurrencies at the moment, and we are happy to service the nationals of those crypto-friendly jurisdictions. For governments that intend on creating stricter regulation, Pundi X aims to comply with those standards that will be defined. Our objective is to operate as a compliant company in every jurisdiction, due to the uncertainties of the current times.
Anything else that we need to talk about?
For investment, always do research to understand what you are going to invest
It is a universal thumb rule for all the things you put your money in. The technology behind the cryptocurrency is promising as it will reduce the costs of cross-border remittances and giving control of the data back to users. That’s why we continue developing exciting technology to move the industry forward.