The pandemic has caused a sudden and rapid shift to digital mediums due to forced lockdowns. Coupled with a historical depreciation of the rupee, digital assets are emerging as a less volatile form of wealth. Our estimation suggests that the convenience, transparency, low costs of transaction, easy-to-use payment system, powered by blockchain is going to be the future of financial transactions but if India wants to be a part of the new emerging global financial ecosystem, it needs to have a stringent regulatory framework to be its backbone, says Navin Gupta, Managing Director, South Asia & MENA at Ripple, in conversation with Elets News Network (ENN).
1. Give us an overview of your products and services in India.
As a blockchain-based technology company, Ripple aims to provide a frictionless experience to send money globally. Ripple’s products are based on blockchain technology and utilise the cryptocurrency called XRP to facilitate cross-border transactions for its network of financial institutions. Ripple also utilises an interbank messaging system that’s used by banks to send money around the world.
While an average international payment transaction takes 3-5 days, Ripple’s goal is to change that through the use of blockchain and to enable the world to move money like information moves today. Ripple’s technology helps minimize remittance costs, cut settlement times from hours and days to just 3 seconds with the use of XRP, and remove billions of dollars in unnecessary intermediary fees. Ripple has more than 300 customers in over 45 markets across 6 continents today.
Ripple is unique as we are the only blockchain company whose products are being used commercially by its customers. This is important as we aim to work with existing financial institutions, along with regulators, governments and central banks, to help evolve the financial systems from within. We work with customers in India, including leading banks like Kotak Mahindra Bank, IndusInd Bank and Yes Bank.
2. How is the virtual currency segment performing post the Reserve Bank of India’s verdict on revoking the Ban?
The lifting of the RBI ban on trading of digital assets has encouraged companies to consider reviving plans to invest and expand businesses in India. However, digital assets still exist within the grey area, though not outrightly banned. This has caused many banks to halt payments for currency trades, be it in India or overseas, in the absence of any specific communication from the RBI following the Supreme Court decision.
In our view, this lack of regulatory clarity on digital assets is the biggest roadblock in India. Especially as India heads into a path of recovery to get digital assets into play, a regulatory framework needs to be put into place before organizations can confidently adopt the use of it.
There is a lot of potential in India, and opportunities for many ambitious innovators who can succeed with the right kind of regulatory framework and support. With such a high number of Indians employed overseas, India is the highest recipient of foreign remittances. This means that there is demand for fast and cost-efficient methods of cross-border transactions, made possible by enterprise solutions like Ripple’s On Demand Liquidity (ODL) that leverage the digital asset XRP.
3. What are your expansion plans in India?
India is a key market for Ripple. We are also seeing various companies showing interest in investing and exploring opportunities here, indicating a fast-growing market. To give you an idea of the volume of cross-border transactions, there are about 35 million Indians who live overseas, and they send huge amounts of money back home. On average, 7% of the principal value gets taken away every time they remit money to India.
The current version of our RippleNet solution does not use the digital asset XRP in India considering the regulatory landscape. However, Ripple is keen to introduce the ODL (On Demand Liquidity) solution to the India market to make remittances faster, easier, better and cheaper through the use of digital assets.
Before we can introduce ODL in India, we are looking forward to clarity around the regulatory aspects of digital assets from the government. Along with other players in the financial industry, we too are optimistic about a robust regulatory framework being adopted by India so that Ripple can help more businesses succeed.
4. How a regulatory framework can help digital assets adoption in India?
Ripple strongly believes that imposing an overall ban on the use of digital assets is not the answer. Regulation rather than relegation would be a better way of dealing with digital assets and its effect on innovation. Therefore, the best approach would be to create a robust legal framework that incorporates all stakeholders in the financial ecosystem.
With inputs and suggestions from both the public and private sectors, we believe that Indian policymakers would be able to navigate the responsible adoption of digital assets in a holistic and more informed manner. There is a wealth of precedents available in India’s financial and technological policy that may be followed here; in the past, both the Data Privacy Bill and the Indian Bankruptcy Code have had the benefit of public consultations, as does the Telecom Regulatory Authority of India (TRAI) regulation of net neutrality. Therefore, we urge India’s policymakers to initiate a similar process of public consultations in connection with any proposed policy action touching upon digital assets in India.
Recently, Ripple launched a policy paper titled ‘The Path Forward for Digital Assets Adoption in India’ that takes into account a global economy with a growing appetite for the adoption of digital assets. Through this paper, we urge Indian policymakers to have extensive consultations with stakeholders in the digital assets ecosystem and the wider public before taking any policy action touching upon digital assets in India.
5. What opportunities do you see for the sector during the Covid-19 outbreak?
The pandemic has caused a sudden and rapid shift to digital mediums due to forced lockdowns. Coupled with a historical depreciation of the rupee, digital assets are emerging as a less volatile form of wealth. This is believed to be a direct impact of the Supreme Court lifting RBI’s ‘unconstitutional’ two-year ban on cryptocurrencies.
While the per-transaction value of remittances has reduced, individuals are still remitting money to friends and family who depend on it for essential needs. In fact, remittances are a key source of capital income in low-income countries. For some developing countries, remittances can represent between 5% and 20% of their GDP. This is where companies like Ripple are helping people sustain their remittances without having to worry about the high costs of remittance.
We are confident that the convenience, transparency, low costs of transaction, easy-to-use payment system, powered by blockchain is going to be the future of financial transactions. However, if India wants to be a part of the new emerging global financial ecosystem, it will need a strong legal and regulatory framework to be its backbone.