Cryptos: Against the wall but still battling

The year has been very tough for the Web3, crypto industry and the mayhem which was seen across the startup space has got accelerated in the crypto world. Image: Shutterstock

If ever there was an apt usage for Murphy’s Law (an adage, actually)—‘anything that can go wrong, will go wrong’—it would without doubt be for the crypto ecosystem in 2022. The collapse of stablecoins TerraUSD and Luna, the brain drain to investor-friendly crypto ecosystems, the sustained fall in prices of poster-boy crypto currencies Bitcoin and Ethereum (both down over 60 percent YTD) as investors exited riskier digital assets, and the FTX exchange filing for bankruptcy after a bank-type run all make 2022 a forgettable year for cryptos.

Add to this a fire-breathing regulator in the form of the Enforcement Directorate, which probed the role of at least 10 crypto exchanges in alleged money laundering via cryptos, and you have the proverbial crypto winter which became a long and gloomy one.

But this constant distress has brought about some positive changes. Most crypto exchanges have strengthened their KYC norms and anti-money laundering checks. Towards the end of the year, India’s top crypto exchanges, along with Coinbase and Polygon, had formed an advocacy body called BharatWeb3 Association, to boost the growth of the Web3 ecosystem.

“The year has been very tough for the Web3, crypto industry and the mayhem which was seen across the startup space has got accelerated in the crypto world. It has been painful,” says Sandeep Nailwal, co-founder of Polygon, a multi-billion dollar blockchain startup. But for Polygon itself, the year was a remarkable one, with its cryptocurrency MATIC becoming the world’s 10th largest in 2022. “We truly became a global protocol,” Nailwal told Forbes India on the sidelines of its recently held ‘Polygon Connect’ event in Bengaluru.

The burden of being heavily taxed in an uncertain and unregulated trading environment was felt by retail crypto investors. The average monthly spot trading volumes at some of India’s crypto exchanges (combined) have fallen 85 percent in 2022 till mid-November. This is a reflection of the trident effect of the tax structure on crypto trade and services—a 30 percent flat tax, an additional 1 percent TDS for investors and an 18 percent GST to be paid by crypto exchanges—which came into effect in FY23 and has choked crypto trading in India.