Startups and Bitcoins in India

India is one of the world leaders of the technological startups industry. In 2015-2016 India came close to its traditional rival - China - in the number of new technological companies. Indian large and quickly growing population, rapidly expanding economy and highly qualified workforce have made India one of the most attractive places of capital allocation for global VC firms. At the same time, sharp regional inequality, low-income consumers, high administrative barriers and outdated legal system still significantly reduce the growth potentials of the local startup ecosystem.

"The government's position is clear, we don't recognize this (digital money) as legal currency as of now." That statement, made by India's finance minister on December 2017, is not the first time, when local officials address the issue of cryptocurrencies. Earlier, another high ranked Indian bureaucrat made an announcement that the Reserve Bank of India had no plans to regulate crypto. At the same time, it was reported that Inter-Disciplinary Committee within India's Ministry of Finance was actively investigating the legal status of digital currencies and considering the possibility of regulating this area. Later it was revealed that the Indian government committee has ruled in favor of regulating cryptocurrencies.

Those contradictory statements confirmed the fact that Indian regulators have not been able to work out an unified approach to the issue of digital currencies governance. At the same time, Modi's demonetization policy, which major goal is to impose total government's control over the monetary flows within the country, can be undermined by cryptocurrencies, which major features are anonymity and decentralization. It highly increases the probability of Indian officials introducing harsh restrictions on the crypto-industry operators or banning Bitcoin completely. Meanwhile, trading cryptocurrencies as well as organizing ICOs remain technically legal in India.

Business Notes for Startups Founders:

political climate: marginally friendly;
economic climate: generally friendly;
regions to focus: locally, WW;
industries to focus: many;
major limitations: low-income consumers (per-capita under $2000), high legal and administrative barriers, key rate at 6%, fixed Internet penetration rate is under 35%;
stimulus: consistently growing economy (GDP growth rate has stayed about 5% for more than two decades), services accounts for more than 60% of GDP, very large population of over 1.3 billion, access to seed and VC capital (mostly in main cities), qualified work-force, relatively low costs of running an e-business;
opportunities: to create a global e-business aimed at younger users of mobile Internet on both internal and external markets;
Cryptocurrencies and ICOs (outlook): legal (negative).
The author: Svyatoslav (Svet) Sedov

Angel investor and founder of The First International Incubator for Silicon Valley Companies (FirstInternational.In) in the Bay Area, CA, USA.

Twitter: https://twitter.com/SvjatoslavSedof