Crypto-focused funds switch strategy amid talk of trading ban

Mumbai: Some blockchain and crypto-focused funds are rethinking their investment strategy amid speculation that trading in virtual currencies will be banned.

They are planning contingencies to ensure that they do not face a situation like 2018 when the Reserve Bank of India cut banking access to the crypto and blockchain community.

Although the broader crypto community thinks the ban is unlikely, some funds are erring on the side of caution.



Early-stage venture fund Amestan Capital, which has invested in a handful of Indian projects in the decentralized finance (DFI) and non-fungible token (NFT) space, halted investments in November, following reports that a cryptocurrency bill would be introduced in the upcoming Will go Winter session of Parliament.

“We are still not clear on the playbook set by the government; If there are certain conditions that can hurt innovations in the space, builders will choose to move out, and we will have to too,” said Sachin Jain, co-founder, Amsten Capital.

ET reported in October that more than $500 million of venture capital has flown into Indian startups in the crypto and blockchain space, compared to less than $40 million last year. The bulk of this has come from international investors eager to capitalize on India’s large client base as they have backed companies with significant traction.

A possible ban would cloud sentiment about the community and could potentially hinder the flow of risk capital into India, said Akshay Aggarwal, cofounder of Blockman Studios and Blockchain India, as part of which he specializes in Indian startups in the region. Provides investment facility through marquee funds.

Agarwal said it has helped startups establish an investment and hiring structure that is not dependent on India, so that they can continue to build when things go bad.

“When we talk about ecosystems, we are influenced by how the West sees us because it is a global place and the activity of the West drives a lot of momentum in the region,” he said. “If any restrictions or even a little bit of negative regulation are in place, we need to think about how we should navigate around it in order to continue at the pace we have for the most part of the year.”

Some venture capitalists who have seen several cycles of regulatory uncertainty, however, remain optimistic about India’s prospects and look forward to unveiling innovation-friendly regulations on the government.

Saurabh Sharma said, “I am hopeful that they will regulate for any nefarious activities which is undoubtedly necessary but support this fast growing asset class of the modern age and also put India at the forefront of the new digital world. Bringing in empower the local talent base.” General Partner at Jump Capital, which was an early investor in crypto exchange and unicorn CoinDCX.

developers suffer

Experienced entrepreneurs and investors in this area have built funding structures and registered their entities in locations that are crypto-friendly.

Crypto and blockchain serve a global community, so the market is also not dependent on India. However, there is a growing developer community in India which has grown due to the boom in the crypto market in the last nine months.

Nasdaq-listed Coinbase Inc. has set up an office in India and is aggressively hiring from the tech community. Solana and Polygon have also organized hackathons to promote the local developer community.

“This (negative news) affects the youth the most who are just entering Web 3.0, especially those who are in the early stages of their careers. This will prevent them from taking job offers and switching. It happens every time the government makes claims like this – that’s what worries me,” said a senior member of an investment team at a blockchain and crypto-focused fund, requesting anonymity.

The last three years have been confusing for the founders and developers of the sector in India.

According to many, the ecosystem has mostly shifted to countries that have a friendlier approach and see it as a “safe bet to protect their families”, unless there is a clear direction from the government. .

The new crop of talent joining the ecosystem this year could follow suit.

For example, a 19-year-old developer building in a DeFi project said that despite repeated cycles of regulatory uncertainty in India, the current scenario leaves him fearful for the future of his project and he is planning for contingencies, including relocation. Was. base for another country.

The year so far has been a historic one for the crypto industry in terms of retail participation and capital inflows. This has spawned two crypto unicorns and has also seen mainstream Indian VCs take the field. Sequoia Capital India has invested in CoinShift, CoinSwitch Kuber and FaZe Technologies this year, while VCs such as Kalaari Capital and Elevation Capital are also entering the space.

Elevation Capital principal Vas Bhaskar said the fund was optimistic about the dialogue that would open this avenue for regulations, and that it would continue to invest the same amount of time, capital and resources in the sector.

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