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    Cryptocurrency crackdown makes startup India uncompetitive

    By Garrett Kinsman
    January 26, 2018, Updated on : Thu Sep 05 2019 07:13:35 GMT+0000
    Cryptocurrency crackdown makes startup India uncompetitive
    A Dispatch from San Francisco, California
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    A new wave of hype and radical change is sweeping the world as everything blockchain is cast upon a golden light. New laws impacting India’s startup and banking communities involved with cryptocurrency are keeping India from competing on the global stage.

    I left Ola Labs in Bangaluru after helping co-found Ola Play. The team I helped create the future with was incredible, and most of us have moved on to tackle new, wild ideas. Conversations in Koramangala cafes have lead to my friends building secret labs at Myntra, or developing radical new Artificial Intelligence.

    These incredible achievements around me were led by Indian Innovation, and foreign financial investment. This outside investment is quickly evolving from classical cheques and bank transfers, to cryptocurrency, something that the Indian Government is stifling today.

    After spending a year at Ola, and eight months roaming India, I found myself in California, co-founding a tech company with old friends. Here in California, new kinds of startups are raising much of their initial funding in cryptocurrencies like Bitcoin, Ethereum, and Stellar Lumens.

    A friend of mine asked me something disturbing, “What is one US dollar backed by?” I know it used to be gold, but now I wasn’t so sure. We use the Fiat System today.

    "What is one US dollar backed by?”

    “Trust,” He told me. In many countries this model of trust had broken down, like Venezuela, making their native currency practically useless. “And one Bitcoin?” he asked, “Energy consumed by computer work.” This made me think. The money we used everyday had no substance backing it up. While crypto, generally “mined”, represents energy and CPU cycles.

    Crypto also makes it incredibly easy to send money internationally. BTC (Bitcoin) and ETH (Ethereum), have become universal, global currencies, enabling a developer in Singapore to be paid in the same currency as an app designer in Bangalore. Having engineering labour paid in crypto means that companies are keeping a percentage of their assets in native cryptocurrency. Many companies here in Cali are finding crypto so essential to their engineering workflows that they are raising millions of US Dollars of venture funding in cryptocurrency.

    Currencies like XLM (Stellar Lumens) are also much faster than the old banking systems, keeping startups competitive. XLM can be sent in 3-5 seconds! This is unlike classical banks, which can take 3-5 days! David Mazières, a co-founder of Stellar, said traditional banking networks are like email before Internet Protocol. Where global banks will charge up to $50 USD or more for a transfer, XLM fees are a fraction of a cent.

    For example, sending an outward remittance of 48,000 Rs from HDFC bank in India to the US is nearly impossible. After hours of sword fighting the HDFC website, I discover that "Remittance to your own account abroad is not permitted." The incompetencies of traditional banking institutions are fueling the youth of planet Earth to replace cash with crypto. Goodbye HDFC and hello Crypto! Life is so much happier this way.

    In stark contrast to confusing routing numbers, horrible customer service, and devastating websites, cryptocurrency addresses look something like this (send me Lumens!):


    An amount is typed in, and money is sent in seconds. You can generate your own wallet here: https://www.stellar.org/account-viewer/#!/ just click “Generate”. Buying Lumens with Fiat currency requires an exchange, or a friend who holds Lumens. 

    Here in California, we are witnessing incredible amounts of crypto moving out of China, Europe and Russia, into startups around the world. This is a huge opportunity that India is missing out on. Converting crypto into cash is enabling startups to quickly raise funds and scale, but is becoming nearly impossible in India.

    As the FT reports via Cointelegraph, “State Bank of India (SBI), Axis Bank, HDFC Bank, ICICI Bank and Yes Bank have all taken strong action toward crypto exchanges, either closing accounts or severely limiting functionality.”

    "ICICI Bank ...[has] taken strong action toward crypto exchanges,"

    For the record, ICICI bank has partnered with the Stellar Foundation to build crypto into their backend, saving tremendously on inward international remittances, and passing the fees onto the consumer. Indian banks are leveraging cryptocurrency to decrease costs, yet local citizens are increasingly being inhibited from using these same technologies. These technologies are cast in a light of social empowerment.While they will do some good in the hands of banks, banking institutions are leveraging blockchain technologies purely as a way to increase revenues.  

    <a href=

    https://cfi-blog.org/2017/08/08/icici-bank-and-stellar-using-blockchain-to-reach-the-base-of-the-pyramid-in-india/" alt="https://cfi-blog.org/2017/08/08/icici-bank-and-stellar-using-blockchain-to-reach-the-base-of-the-pyramid-in-india/" />

    As industry moves further and further towards a world of crypto-centric financing, India is left out of the innovation that will arise through cryptocurrency investment.

    In California, A new financing method has become popularized called an Initial Coin Offering. ICOs operate on the premise that a company builds a token, (generally built upon ETH [ERC20] or XLM ecosystems), and offers it to investors in exchange for their services or equity. Custom tokens that can be used in exchange for a product or service are called Utility Tokens. ICOs offer a way to raise financing for a company without giving away any equity to investors. 

    Tokenizing equity provides a way for startups to quickly scale and accept international investment. 

    Utility Tokens enable startups to create whole financial ecosystems of their own, without giving away any equity.

    Coindesk states that over 4 Billion USD has been raised in 2017 through these methods. Investors buy a startup’s native currency for cash or other cryptos, and trade it on the open market.


    India’s refusal to accept this new type of fundraising, and inhibiting conversion of crypto into the local Rupees will stifle India’s startup landscape. Tokens are becoming the financing of the future, as is made very clear here in California. If these laws persist, India will become increasingly uncompetitive.

    India has always been the center of financial innovation. At Ola, one of my colleagues while drumming away to death metal told stories of coding mPesa. Mpesa changed the game in Kenya, being one of the first mobile apps to bank millions of people. It was developed right in Bangalore. Mpesa helped inspire the payment apps that billions of people use today, from WeChat pay, to PayTM, to Apple Pay.

    Cryptocurrency as a whole is not “a Ponzi scheme” as the Reserve Bank of India states. Crypto is a new age in economics, as important as electricity is for communication. I hope India’s legislators can see cryptocurrency as the future, a way to easily bring foreign capital into the country, and accelerate the already exciting Indian startup community I have grown to love.

    Garrett Kinsman is a 22 year old co-founder of Nodle.io , He previously led hardware at Ola Play