Regulatory Uncertainty Kills Innovation?

India is a country full of amazing technology innovators and a booming startup ecosystem. Given its long legacy of creating technology for the general public, it needs to be a powerhouse in Web3. We have the raw ingredients, the appetite and the critical mass to take over this space. Are we now in danger of wasting this chance? All because of regulatory ambiguity?

It’s as painful as witnessing a young star runner fall a few yards short of victory in an Olympic final. The promise for impact is great, and the training is done. It wouldn’t take much for progress to be derailed by vague and prohibitive regulations.

The current regulatory landscape is a minefield. Startups are left to deal with the burden of uncertainty, not knowing how their chips will land on this roulette wheel. This isn't just inconvenient; it's crippling. Investment evaporates, talent moves on and the whole ecosystem goes stagnant. To do otherwise is like trying to build a skyscraper on shifting sands.

First, we don’t even know what the rules are! Is it a legitimate effort to safeguard consumers, or is it a misguided, knee-jerk reaction from the fear-mongering and misinformed? The ambiguity is overwhelming, and the instruction to be quiet is saying all that needs to be said.

Global VCs Win, India Loses?

Here's where it gets even more frustrating. The regulatory fog doesn't affect everyone equally. Global VCs, with their armies of lawyers and experience navigating complex jurisdictions, are far better equipped to deal with the uncertainty than nascent Indian startups.

Consider a game of chess, for instance. One side has all the pieces, while the other is restricted to only pawns. Cast your ballot for our predictions of who’s going to win!

This creates a perverse incentive. Tighter rules are intended to shield Indian investors from being scammed. Yet, they paradoxically create a harsher environment for Indian startups to compete and advantage the global venture capitalists. This would lead to foreign players completely dominating the best Indian Web3 startups. Is that really the outcome we want? Are we inadvertently exporting our future?

It’s a bitter pill to swallow. We risk building a Web3 future in India, but not necessarily for India, with the value flowing outwards instead of staying within our borders. We're essentially giving away our home-field advantage.

Unicorns Or Community Strength?

This obsession with “unicorns”—the billion-dollar companies we’re all hunting for—could be preventing us from realizing the true transformative power that Web3 can provide. In this so-called decentralized world, shouldn’t we be trying to create strong, community ecosystems instead of going for the big valuations?

Now imagine a Web3 project helping farmers reach consumers directly. This plan cuts out middlemen and increases their bottom line to the tune of billions. It may not be a unicorn, but it has the potential to be an agency that truly changes the lives of millions. Isn't that a more valuable goal?

If we want to be Web3 and succeed beyond just speculation, we need to change what success means. Perhaps ownership should be based on tokens rather than shares. Perhaps we should start measuring revenue and fiscal strength through utility and community resilience.

The government focuses on building digital public infrastructure examples like Aadhaar, UPI. This move serves as evidence of its commitment to establishing a trust-based, digital ecosystem. That's just the foundation. We’ve just got to construct the house, and that takes a whole other kettle of fish.

  • Aadhaar
  • UPI
  • ONDC

While these tools are big improvements over the past. These investments need to be paired with a regulatory framework that supports Web3 innovation rather than quests to crush it.

We need a balanced approach. One that protects consumers without crushing innovation. One that spurs innovation through robust domestic investment but does not close the door to global competitors. One that puts Indians first and truly builds a Web3 future for India, by Indians.

The time for action is now. It will take a clear, transparent and forward-looking regulatory framework. We need to unlock domestic capital. We need to support alternative funding models. Connected to this, we need to appreciate and support a culture of innovation and experimentation.

If we don’t work together to realize this vision, India’s Web3 aspiration will only continue as a dream. And that would be a tragedy.