India’s burgeoning technology sector and rapidly expanding economy place it in an ideal position to capitalise on the potential of the Web3 revolution
To maximise the benefits of the newer technologies, India must establish a nurturing environment for Web3 startups and developers
In this article, we will explore how India’s government and businesses can cultivate a thriving Web3 ecosystem to stay ahead in the global blockchain race
The evolution of Web3 is the iPhone moment for the world of blockchain technology. Rapid advancements in the Web3 space have nudged the whole world towards adopting cryptocurrencies and other related technologies. India leads the momentum in the Web3 space and has had an immense impact as a technological backbone and is the hub for brewing talent.
What Is Web3?
Web3 is like a big garden on the internet where everyone can plant and grow their own flowers. In this garden, people can grow unique and beautiful flowers that don’t need a grown-up to care for them. Everyone gets their little plot of land to plant their seeds, and they can share their blooms with others in a safe and equal way.
Just like you have your own gardening tools, in Web3, you have a special box with your tools, and no one else can use them without asking you. This way, everyone can enjoy gardening together, and the garden stays a friendly and fair place for all the little gardeners!
India’s burgeoning technology sector and rapidly expanding economy place it in an ideal position to capitalise on the potential of the Web3 revolution. To maximise the benefits of the newer technologies, India must establish a nurturing environment for Web3 startups and developers. In this article, we will explore various essential measures India can undertake to cultivate a thriving Web3 ecosystem.
The India Story
Though India is among the top Web3 adopters, regulation in the space is still nascent. The tax laws introduced in the Finance Act 2022 still have some ambiguity. Additionally, the TDS legislation has adversely impacted the sector. Framing and implementing clear regulations and ensuring enforcement will be the key factor that helps India emerge as a Web3 hub.
The lack of a clear understanding of the government’s approach to regulating Web3 in India has led numerous entrepreneurs to relocate to more Web3-friendly destinations such as Dubai and Singapore. However, there is abundant Web3 talent that is still prevalent in India. As per a 2022 NASSCOM report, 60% of Indian Web3 startups were established overseas but employed domestic technical talent.
Data from the NASSCOM report suggests that Web3 investments in India have totalled over $1.3 Bn since 2020. Meanwhile, India’s active Internet users are expected to increase by 45% and touch the 900 Mn mark by 2025. With mass adoption and robust regulations, Web3 business growth can add $1.1 Tn to India’s GDP by 2032.
The deployment of 5G combined with a vast talent pool in multiple Web3 industries puts India in a unique position to leverage the crypto and Web3 sectors to manifold its economy.
It is vital to ensure that streamlined regulatory processes are framed. For instance, legislation and laws on crypto and Web3 will offer brands and agencies the confidence to continue their research and build for India.
We still need to establish a well-defined regulatory framework that supports the growth and adoption of Web3 technologies, including blockchain, decentralised applications (dApps), and cryptocurrencies. This framework should provide clear guidelines for businesses and users while protecting consumer interests and preventing illegal activities.
The success of Web3 can open many possibilities for public-sector applications in arenas such as digital payments, land registrations, notarisation, supply chain traceability, healthcare, education, data management, auditing, taxation, and voting. Industry-friendly regulations will propel international collaboration and bring more certainty into the wider sector.
Steps Taken By The Government So Far
The Union government has been keen on fostering the development of the Web3 ecosystem, which includes blockchain and cryptocurrency. While the union budget did not focus much on these areas, the Economic Survey spoke of the need for better monitoring and regulation of cryptocurrency.
Cryptocurrency-related businesses have recently been brought under the PMLA (Prevention of Money Laundering Act). AML and CFT guidelines for Crypto/Virtual Digital Assets service providers are effective immediately. It involves them having:
- Comprehensive KYC norms
- Suspicious Transaction Reporting
- Specific obligations for ICO and Crypto transfer
- Travel Rules
The Chief Economic Adviser said, ‘While approaching cryptocurrencies carefully, regulators should consider centralised intermediaries as systemic financial market infrastructures.’ This contrasts with hysterical calls to outlaw or otherwise enforce a blanket ban on cryptocurrency.
Meanwhile, some state governments like Telangana are recognising the importance and value of blockchain and allowing Web3 startups to test the RBI sandbox ecosystem for financial innovation. Creating the National Digital Infrastructure Authority and the National Data Protection Authority is a step towards creating a secure and reliable Web3 ecosystem in India. Maharashtra too has initiated steps to use the potential of Web3 in various skill development initiatives.
What Needs To Be Done?
To foster the Web3 ecosystem, a unified strategy is required to regulate the crypto sector. The regulations should mainly focus on protecting user data, preventing fraud and cybercrime and promoting interoperability. Policies encouraging the use of open-source technologies to facilitate the development of innovative applications and services must be introduced. It will allow developers to build innovative applications and services on top of existing technologies.
As India holds the G20 Presidency, it has the opportunity to establish a regulatory agenda in the space that other big economies can follow. Major regulatory principles of the traditional banking sector can be implemented in crypto and Web3, including tight KYC requirements, transaction monitoring, reporting suspicious behaviour, and strict internal controls to prevent money laundering and other illicit actions. India stands at the cusp of the Web3 revolution and can herald a golden era for the sector in the coming years, backed by government support and good regulation.
How To Grow The Spectrum In India
Here are a few approaches to how this technology can facilitate India’s growth on the right path:
- To promote the growth and development of this ecosystem, it is important to take a collaborative approach that involves government agencies, private entities, and educational institutions. This can be achieved by creating dedicated task forces, providing funding support, and facilitating partnerships. Additionally, prioritising education and skill development in the Web3 domain through academic curriculum, workshops, hackathons, and training programmes can encourage skill development.
- To ensure the necessary infrastructure is in place to support the Web3 ecosystem, investments in high-speed internet connectivity and data centres are essential. Offering incentives and tax benefits to startups, businesses, and individuals engaged in this ecosystem can help attract investment and talent. Supporting and promoting local entrepreneurs and developers working on innovative Web3 projects can be done through incubators, accelerators, mentorship programmes and funding initiatives.
- Encouraging the adoption of Web3 technologies in the public sector, such as e-governance, healthcare, and education, can showcase the potential benefits of these technologies and inspire further innovation in the private sector. Active engagement in international dialogue and collaboration on Web3 policies and standards can help India stay at the forefront of technological advancements and ensure interoperability between blockchain networks.
- To foster a decentralised mindset among citizens, promoting the principles of trust, transparency, and security that underpin Web3 technologies is crucial. Lastly, investing in robust cybersecurity measures such as developing security protocols, best practices, and guidelines to mitigate risks and ensure user privacy, is essential to protect the integrity of the Web3 ecosystem.
AI and Web3 are in a race right now about who will grow faster. With GPT-4 release, AI/ML space definitely has the edge over Web3 space regarding speed and adoption rate.
The Web3 ecosystem is an emerging concept in India that has the potential to transform the way we use the internet and handle data privacy and ownership. Web3 provides various benefits to the Indian economy by leveraging blockchain technology and decentralisation, such as improved security, transparency, efficiency, and financial inclusion.
One of the significant advantages of this ecosystem is decentralisation, which eliminates the need for third-party intermediaries, making transactions faster, cheaper, and more efficient. Additionally, blockchain technology ensures increased security by using cryptography and distributed ledger technology to protect data from tampering.
It’s transparency is another essential feature that enables anyone to view and verify transactions and data on the blockchain, making it a reliable and trustworthy source of information. Moreover, using smart contracts automates various processes, making them more efficient and cost-effective.
Finally, the tokenisation of real-world assets on the blockchain opens up new opportunities for investment and financial inclusion, making it easier for individuals to buy, sell, and trade assets globally.
In summary, the Web3 ecosystem offers India a unique opportunity to grow faster in the blockchain space by providing increased security, transparency, and efficiency. As such, India’s government and businesses should explore and embrace this new ecosystem to stay ahead in the global blockchain race.