We talk about how technology will evolve and shape financial markets in the future. However, technological innovations and regulations do not necessarily go hand in hand. Where do you see the role of regulations in VDAs and Web3 technologies?
New technologies always require that regulations evolve quickly to deal with them. There is always a balance between regulation and innovation. As for regulation, it is necessary because the government must take into account the interests of all kinds of players in various markets. In many cases, participants need to be protected from people carrying out illegal activities, Ponzi schemes where people’s money is taken but not invested properly.
Second, there is always concern about the lack of a level playing field and the fact that some people in the market have information that others don’t and this economy is called information asymmetry . It is therefore very important to ensure that there is a level playing field for all market participants and this is something that only regulation can achieve.
There is a third reason why we need to have regulations and that is to prevent the illicit use of various powerful technologies. For example, in the case of digital or cryptographic assets, it can be used for the illicit financing of criminal and terrorist activities. Those are the three or four important reasons why regulation is necessary.
We all know that innovation results in new use cases, new productivity, and how people can do things they couldn’t do before. When it comes to Web3.0 and when it comes to crypto assets, there are many use cases that can be much more productive, much more powerful than the existing ways.
For example, today if remittances are transferred between markets, in many cases we pay 3, 4, 5, 6% even as a friction cost as a cost to intermediaries when we make remittances. So if I transfer $100 from UAE to India in some cases I can pay $3 or $4 commission on that with virtual digital assets and these remittances can be done very efficiently with very little friction.
So instead of paying $3 or $4 in commission, maybe I could do it with 30 cents, or about $0.3. In this way, we reduce costs and make things much more efficient and much faster through innovation. But again, even if we have innovation, even if things get easier, there are risks that have to be managed and it is the balance between regulation and innovation that is necessary. Policy makers have always done this and even with the internet, for example, when the internet started, new regulations had to be put in place on intermediaries and on the use of data and so on. The regulations therefore continue to evolve because we must ensure that the public interest is fully protected.
You are now chair of the Standing Committee on Finance. Can you allude to the recommendations made by the JPC for virtual digital assets?
We have not made any recommendations so far. We held a hearing with various stakeholders associated with virtual digital assets and we had a very long discussion with various different stakeholders. It was a very useful and productive discussion and it was in anticipation of the government introducing the Crypto Bill. Of course, the government has decided to wait a bit longer to carry out additional consultations with stakeholders before preparing the crypto bill and so we will continue our discussions with crypto stakeholders once the government will have taken a position on crypto assets and introduce the bill to regulate virtual digital. assets.
In the meantime, the government has introduced a fiscal framework for virtual digital assets which has been discussed as part of our budget deliberations and of course the budget for this fiscal year has been passed and instituted from April 1st.
Crypto assets are important for Blockchain technologies because there are important use cases for this technology. There are reports that the government is considering regulating it. What is your opinion on the government’s current stance of not regulating Metaverse or Web3.0? Can you enlighten us on that?
I really can’t comment on government policies and thinking on this. This would not be appropriate and we need to wait for the government to complete its consultation process and then release a white paper or crypto bill which we can then discuss and debate. Hopefully, if it comes to our committee, we can also evaluate in detail. We will have to wait for the process to unfold.
In the meantime, there are very important use cases. I have already given the example of remittances. There are other important use cases, for example in land records. For example, in smart contracts, Blockchain and the Metaverse can play a very important role in India’s economic growth in different ways.
We are already a leader in games of all kinds, we are already a leader in animation, we are already a leader in virtual worlds and having at our disposal Blockchain and distributed entertainment technology for these purposes is going to be very useful as part of our growth and as part of our leadership in these new technologies.
While India is a software superpower, we are still miles away from the Blockchain revolution happening across the globe. How can we catch up? What is your opinion on this?
I wouldn’t agree with that. The thing is, we have many smart young people, many teams working on different use cases that are unique and adapted to Indian conditions and many of them are already scaled and tried.
Of course, there is no financial aspect at the moment just because we have to come up with a proper regulatory framework for virtual digital assets, but many different use cases are already tested and experienced. We have the third largest start-up ecosystem in the world and a lot of very well-funded start-ups, I think once the regulatory framework is in place we can bring the financial aspect to that as well.
There are many use cases that don’t actually require the financial part and they can be just applications or Blockchain technology just like smart contracts.
Do you see digital assets and NFTs as potential investment avenues in the future?
Absolutely. I believe that in the future, virtual digital assets and NFTs will be a very, very interesting asset class because they will be tied to specific use cases that will make existing solutions quite obsolete. For example, if you take the ability of NFTs to have a way of securing ownership of digital assets – say if you have an image that is a digital movie – then you can secure ownership of it using NFTs. If you have digital art of any kind, you can secure ownership of it. Iconic photographs, historical photographs can be secured with NFTs. So there are some great use cases in the metaverse that can only be secured and moved from one owner to another via NFTs.
NFTs are going to be very important as we spend more and more time in the metaverse. Already we spend so much time on smartphones or PCs, screens of all kinds and most people spend around three or four hours a day between TV, phones and other devices. It will move more and more into the metaverse where we can undertake a whole range of much more interesting and exciting applications and once we get into the metaverse and spend four, five, six hours a day there, we will have to secure our goods and digital assets.
For that, NFTs are a fantastic application and people will need to do that and as you are in the metaverse you will also need to be able to transact. You may want to purchase certain experiences, digital art and certain properties that you would like to display in the metaverse and so we will need to transact and in order to transact we will need crypto tokens. This is what we do in the physical world.
So, more and more, as we spend four, five, six hours a day in the metaverse, we will also need to be able to transact there. It is inevitable and it will be necessary. How this will take shape will be a balance between regulation and innovation. The role of different crypto tokens, crypto assets, the role of sovereign digital currencies will evolve over time, but trends are inevitable. We’ll actually be online in the metaverse for many hours a day and we’re going to need the full range of virtual digital assets, the full range of crypto tokens.
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Metaverse: NFTs Are Gonna Be Very Important As We Spend More And More Time In The Metaverse: Jayant Sinha
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