India is stepping into the dawn of Brain Drain 2.0. The exodus of skilled tech talent in the crypto ecosystem to greener pastures like Dubai and Singapore does not bode well for proliferation of emerging technologies. This trend is unnerving for India which ranks second in crypto adoption, next only to Vietnam. The overall crypto transactions in India soared 641 per cent between July 2020 and June 2021, according to blockchain research firm Chainalysis.
With an ecosystem of 20 million crypto users and 230+ crypto start-ups, India offers immense potential for deeper adoption of Metaverse and Web 3.0 (or decentralized web) – niche technologies where transactions are driven by cryptocurrencies or Virtual Digital Assets (VDAs). Indians hold an estimated $80 billion in crypto investments. Disturbingly, about 10 per cent of it has already moved to private wallets with bases outside of India, as traders squared off transactions and booked profit before April 1, 2022, when the 30 per cent tax on capital gains on cryptocurrencies came into force.
While Indian crypto investors and developers are relocating their bases to friendlier jurisdictions like Singapore and Dubai, Foreign Institutional Investors (FII) have deferred investment plans in India due to a clouded regulatory landscape. India doesn’t have a regulation in place for crypto-related transactions. It means that any dispute stemming from transactions of VDAs gives the enforcement authorities an unfair edge, and litigations may take years to settle in the absence of clear legislation. The Reserve Bank of India (RBI) has been vocal about the threat from VDAs to the country’s financial stability. The Supreme Court overturned a previous attempt by the RBI to outlaw cryptocurrencies in 2020. Post the apex court ruling; the government has been dithering on a law to restrain the use of digital currencies.
This regulatory uncertainty is triggering many crypto platforms and Web 3.0 infra providers to relocate out of India. They are gravitating to more business-friendly hubs like Dubai, which has approved a virtual assets law and appointed a sector supervisor. Dubai also offers a sandbox approach for testing emerging technologies to figure out if they are a fit case for adoption at scale. One of India’s best known Indian start-ups, Polygon shifted base to Dubai two years back. Most well-known crypto companies have floated holding companies in business-friendly destinations like Dubai or Singapore, where regulation is clear and transparent.
Globally, the best tech talent is jumping the crypto bandwagon. The days are passé when landing a job at Google, Meta, Amazon or Tesla meant striking gold. The techies from these massive corporations are moving to NFT and Web 3.0 start-ups as they see such technologies to be laden with possibilities for the future.
India, too, has the potential to be the crypto powerhouse and a leader in Web 3.0. Our regulators need to grasp the promise of blockbuster technologies like Metaverse and Web 3.0. Gartner says that by 2026, 25 per cent of the world’s Internet users will spend at least an hour a day in the Metaverse for shopping, learning, social interactions, etc. Transactions on the Metaverse are projected to be worth $800 billion by 2024, as 300 million users will be actively using this niche tech. The scale of transactions also promises windfall revenue gains for the Indian government.
When the dice is loaded so heavily in favour of the crypto ecosystem, we can’t stay mute watchers to the talent pool leaving our shores. Forewarned is forearmed. It doesn’t take much to retain our niche talent. The priority should be on overcoming the ambiguity of regulation and enacting a transparent law after looping in feedback from all stakeholders. Second, the 30 per cent tax proposed in the Union Budget has rankled many in the crypto ecosystem. The government can have a relook at it and slash the tax reasonably. Finally, NFTs or Web 3.0 are predicated on blockchain technology. Though India has two million+ tech professionals, hardly 5000 of them are skilled in blockchain. The time to build our pool of blockchain skilled talent pool is now. So is the time to clear the cobwebs on regulation.