ETtech Morning Dispatch on Feb 17, 2021: India’s own goal on crypto; Koo sits on the fence


Good morning,

Today we look at how the government may end up scoring an epic own-goal with its proposed ban on cryptocurrencies. Experts say a ban won’t eliminate cryptocurrencies in India, as investors don’t need a middleman such as a bank or a crypto exchange to trade in them. Any ban will thus only drive cryptocurrency transactions further underground, which is the exact opposite of the government’s intention in banning them. Then again, bans that have the opposite of their intended effect aren’t exactly rare in India.

1. India’s crypto conundrum


won’t disappear from India even if the government makes it illegal to own them, experts and CEOs of cryptocurrency exchanges have told ET.

That’s because
the very nature of cryptocurrencies allows them to be transferred from one person to another without the involvement of a middleman such as a cryptocurrency exchange or a traditional bank.

If the new regulations force investors to sell their crypto assets they could have to pay up to 42% tax on their returns.

To avoid this, cryptocurrency investors could use the peer-to-peer method to:

  • transfer their assets to a relative abroad, or a company registered outside India and continue to hold them, or
  • sell their assets to crypto investors abroad

With a blank ban imminent, many investors have already started using this route to transfer or sell their crypto assets, just as they did after the Reserve Bank of India banned banks from dealing in cryptocurrencies in 2018, experts and lawyers said.

But tax experts that avoiding the taxman may not be easy if the crypto assets were brought through Indian exchanges.

No means to enforce ban: They also said the government does not have the means to enforce a ban on crypto, and any legislation to this effect will only drive the market further underground. Ironically, this is exactly what the government is seeking to prevent with the proposed ban.

Sum it up in one quote? “If a ban is imposed… the market won’t disappear, it will merely move to darker corners [of the internet]. The risk of people using crypto for money laundering or terror financing will emerge because regulators will lose sight of their activity. [The government should] set up the legal and policy infrastructure required to regulate these assets rather than ban them,” said Mandar Kagade, founder principal of communications advisory firm Black Dot Public Policy Advisors.

Read our timeline of India’s crypto journey here.

2. Koo perches firmly on the fence


Aprameya Radhakrishna, co-founder and chief executive at Koo app.

“Neither am I right-wing or left-wing, nor is my technology or product.”

Aprameya Radhakrishna, the co-founder and chief executive officer of India’s answer to Twitter that has run into rough weather with the Indian government over what constitutes free speech.

The homegrown microblogging app, which has a yellow bird as its logo as against Twitter’s blue, has wind beneath its wings. Union cabinet ministers are flocking to the platform, the prime minister is endorsing its local credentials, and the government is awarding it for atmanirbharta

And that’s brought more than two million users to the platform over the past fortnight.

Also Read:
Neither Left nor Right, Koo perches firmly on the fence

What fuelled the migration? Twitter did, in a way, with its contradictory stand on accounts that the government wanted blocked for allegedly fomenting the farmers’ protest in Delhi.

Twitter has to comply with the Indian laws irrespective of the company’s rules, the government said last week, expressing a “deep sense of disappointment” over the tech firm’s differential treatment of the US Capitol riots on 6 January and the Red Fort violence on 26 January.

Twitter is siding not with “freedom of expression” but rather with those who seek to abuse such freedom and provoke disturbance to public order, it said.

India’s Parler? Twitter has been called a left-wing platform — notably by Koo’s investor T.V. Mohandas Pai — that gives voice to “anti-nationals” and “extremists”. So, will Koo prove to be closer to India’s version of Parler — a social network popular with right-wingers and Trumpians in the United States?

Radhakrishna for one hopes not. “As a company, we don’t want to be political, we are a private company interested in technology and product,” he said, for at any given time “multiple parties run multiple states”. “As a registered company in India, (Koo) will have to follow the laws of land, irrespective of who is running the government.” he added.

Also Read:
Parler crawls back online on ‘independent technology’

Tweet of the Day

3. ETtech Done Deals

■ TPG Growth, Premji Invest and ChrysCapital
are in advanced negotiations to acquire stakes in SoftBank-backed
Firstcry as the retailer of baby products looks to raise $150-180 million at a valuation of $1.8-2.1 billion, said people aware of the matter. The secondary share of sales will allow some early-stage backers of the 11-year-old company to exit.

The final quantum or number of new investors is expected to get finalised soon, as will the stake dilution which is expected to be less than 10%. According to the people cited above, Firstcry aims to go public in 24-36 months and wants to realign its capitalisation table before that.

Tata Group and Big Basket
have formally signed on the dotted line, finalising a $1.2 billion deal giving India’s largest conglomerate 60-63% stake in the online grocer, two people in the know said.

The transaction, which is a mix of a primary and secondary sale of shares, will provide a full exit to two of BigBasket’s biggest investors, Chinese e-commerce giant Alibaba Group Holdings and scandal-hit private equity firm Abraaj Group, as ET reported on January 20.

Tata plans to take BigBasket public by 2022, as part of the deal terms.

■ SoftBank-backed edtech startup
has acquired
TapChief, an online platform for professionals to earn incomes without full-time jobs. According to the deal, Unacademy will pick up a majority stake in TapChief, ascribing it a valuation of Rs 100crore, providing an exit to existing investors.

For more startup deals and funding news, click here.

4. PE-VC deals shot up 60% between 2016 and 2019

The annual deal count for private equity and venture capital funds in India
increased 60% between calendar years 2016 and 2019, according to a report by global consulting firm KPMG.

The rise mirrors the increased interest in the India growth story and reflects attractive valuations and the better economic performance of the country compared to other emerging market peers, KPMG said. KPMG’s analysis of about 1,900 transactions showed that the aggregate annual deal value doubled between CY15 and CY19.

Infographic Insight

Private equity investmentETtech

5. Telcos vs Apps, again

Telecom firms have cited WhatsApp’s recent privacy policy changes as an example of how over-the-top (OTT) communication players, or apps, have no obligation to ensure privacy of consumers, while underlining the need to regulate such entities to bring them on a par with carriers which offer similar services but are bound by licence norms.

don’t want new net neutrality norms to be enforced till OTTs are brought under licence.

6. Raghunandan G returns with Zolve

TaxiForSure co-founder Raghunandan G.’s global neobank venture Zolve
has picked up $15 million in its seed round led by Accel and Lightspeed Venture, along with participation from Blume Ventures and a group of angels, including Cred’s Kunal Shah.

With the newly infused capital, the US-headquartered fintech startup is set to offer frontend banking solutions to international migrants moving from India to the United States and vice versa, through tie-ups with US and Indian banks in its first stage of launch.

Zolve is set to go live for customers later this year, Raghunandan said.

Top Stories We Are Covering

India, a global reskilling hub: India
could emerge as a global reskilling hub in a post-pandemic world, executives of India’s technology and business process management companies told The Economic Times during a Nasscom event on Tuesday.

The National Association of Software and Service Companies (Nasscom), along with Indian IT firms, has reskilled over a third of the 4.5 million workforce in India in digital skills, helping the tech sector grow in a pandemic year. Indian firms are seeing business grow as many first-time outsourcers and existing clients are tapping into the country’s talent to transform their business in a digital world.

Also Read:
IBM, Tech Mahindra team up for $2 billion opportunity

Qualcomm leases office space in Hyderabad: Qualcomm
has entered into an agreement to lease over 1.6 million sq ft of commercial space in realty developer K Raheja Corp’s IT park in Hyderabad in the largest commercial office lease transaction in 2021 so far, said people with direct knowledge of the development.

The commitment for the large office space at the developer’s under-construction project Commerzone Madhapur is part of Qualcomm’s growth and consolidation strategy.

The deal will have a total tenure of 10 years.

Tata, Tamil Nadu sign MoU for mobile gear unit: Tata Electronics
has signed a memorandum of understanding (MoU) with the Tamil Nadu government to set up a facility for manufacturing mobile components. The company said it will invest Rs 4,684 crore in the new plant, which will come up at Krishnagiri and employ an estimated 18,250 people.

The MoU is one among a total of 28 signed by the state on Tuesday, entailing a total investment of Rs 28,053 crore and employment for 68,775 people.

Global Picks We Are Reading

The State House vs Big Tech: This will be one of the inescapable threads of our digital lives: Government authorities almost everywhere are weighing whether and how to assert more control over the technology that shapes our future.
(The New York Times)

Inside WeChat’s struggle to slow down TikTok: A cartoon pig raps about the misery of job hunting during the pandemic. Another clip says a shortage of office toilet paper is a sign of a failing company.

Both bite-size videos were posted online by Xiao Yang as part of his job marketing a company that sells online career services in China. His videos do pretty well on TikTok. Xiao’s top video there has 28,000 likes. He also adds his videos to WeChat but his best video there has just 27 likes.
(The Information)

The other reason why China blocked Ant IPO: When China’s leader Xi Jinping late last year quashed Ant Group’s initial public offering, his motives appeared clear: he was worried that Ant was adding risk to the financial system, and furious at its founder, Jack Ma, for criticising his signature campaign to strengthen financial oversight.

There was another key reason, according to more than a dozen Chinese officials and government advisers: growing unease in Beijing over Ant’s complex ownership structure—and the people who stood to gain most from what would have been the world’s largest IPO.
(The Wall Street Journal)


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