From Consumers To Blockchain Developers: Various Stakeholders In Crypto Ecosystem And The Roles They Play

In India, there is a lot of appetite for crypto and most of the population has the resources to invest in digital assets. 

VDAs have seen large amounts of fund inflow in the last three years.

By Muthuswamy N Iyer

Stakeholders are an important part of the crypto ecosystem since some of them have been crucial in creating regulations to shape the policies of this industry. Ever since Bitcoin was conceptualised, and eventually made popular, crypto has entered several countries, financial institutions, and reached investors far and wide, unifying them in a figurative way. However, with the rising popularity of virtual digital assets(VDAs), there has been a demand for new rules and regulations, policies, investor protection mechanisms, and the availability of technological infrastructure to support its growth.

Therefore, it is important to take a look at the key stakeholders of the virtual digital asset ecosystem to understand how this sector has taken shape and what opportunities lie ahead. 

End Users/Consumers

Crypto’s popularity became widespread in 2020 when the coronavirus-induced pandemic impacted traditional financial services in several ways and people worldwide started doing their due diligence on crypto. 

There are approximately over 420 million crypto investors in the world (including 150 million in India) and they play a crucial role in establishing the market sentiment, affecting prices of tokens, trading on platforms, and using crypto for transactions even if it’s at a low scale.

With the rise in the number of users, market sentiment and price fluctuations are prone to become volatile. This, in turn, might affect organisations that do not have an airtight way of approaching bear markets or are involved in illegal activities without investors’ knowledge. 

The key to dealing with investor-driven market volatility is to ensure that countries make investor protection a priority. This can be achieved by consumers making a unanimous demand for the same. 

They can choose to engage with platforms offering transactions in crypto assets which abide by these policies and create their individual laws around ensuring that investors’ funds are safe. This way they can shape policies around safe investment in VDAs.

Platforms/Exchanges/Wallets

Exchange platforms allowing users to trade in crypto assets are the most popular places to buy and store your digital assets, followed by cold wallets. 

Exchanges enable users to trade, buy, etc. whereas a wallet can be used as an address where a user receives money, similar to a bank account. A breach of trust has resulted after the FTX crash in the crypto ecosystem. 

It made several users doubt exchanges due to the lack of adequate regulations by the government. However, since they remain the preferred choice for buying/selling crypto. In order to revoke the feeling of trust among investors, they must continue to create case study-based evidence of the value that digital assets can add to the ecosystem. 

Besides that, several countries have implemented taxation of VDAs over the last few years. Exchanges should responsibly ensure that users abide by tax laws and provide guidance on how their assets will be taxed for activities related to crypto.

Legal Platforms/Asset Risk Management Service Providers

While this sector is quite niche and emerging, their role has become vital with the increasing popularity of VDAs and overall optimism in the country, especially in regard to India’s goal of regulating crypto as G20 president. 

There is a need to protect platforms from data breaches, ensure compliance for individual players, organizations, etc., and tackle misconceptions which are prevalent with any emerging asset category.

Founders Of Crypto Organizations/Policymakers/Think Tanks

Education is a key component of ensuring a safe adoption of VDAs especially in a country which has the seventh-highest adoption rate of crypto in the world. Crypto might have become a familiar word to many with the ease of availability of tokens and means to purchase them but an in-depth knowledge about their technology, functions, and potential remains unknown. 

It is important for industry thought leaders to take up the responsibility of making the masses aware of the immense potential of crypto. 

They are also in an optimal position to directly engage with government officials and regulators to propose a conducive policy framework for the country.

Blockchain Developers

While this remains a small cohort, it is becoming an area of opportunity for aspiring developers who are fascinated by Web3 and want to explore what it has to offer. 

Existing developers can inspire the vast Web2 talent in the country to upskill themselves with blockchain technology knowledge and contribute to Web3 projects, thus influencing the talent ecosystem to grow.

VCs/PEs/Angel Investors

VDAs have seen large amounts of fund inflow in the last three years. There have been dedicated units of decentralised fundraising, and new wings of existing investment firms to push more and more liquidity in crypto markets. 

These investors can advocate for rules to be embedded in smart contracts so that all funds are accounted for and no projects can default with investors’ money. 

They should also ensure that they request transparent tokenomics, in order to not have a power struggle among the stakeholders of the projects that they back. This will lead to a stable environment for new projects and assure new founders and investors too.

Overall, the use and acceptance of VDAs are based on a country’s political and economic condition. In India, there is a lot of appetite for crypto and most of the population has the resources to invest in digital assets. 

There is a lot of enthusiasm around building new projects in Web3 and with the rise in adoption, stakeholders’ role in regulations will become more pronounced as compared to the overlapping responsibilities that exist currently. 

(The author is the Head of Legal & Compliance at WazirX)

Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP Network Pvt. Ltd. Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.