This trend reflects the momentum of crypto globally. On Friday, San Francisco-based Bessemer Venture Partners announced a dedicated $250-million fund for crypto investments. Two days before that Bain Capital Ventures announced a $560-million fund for crypto-related startups and decentralised autonomous organisations (DAOs).
The largest funding round by an Indian-born crypto startup — $450 million by Polygon — took place on February 7, led by Sequoia Capital India.
“The sector is attracting capital organically and will continue to do so this year. There are a lot of international investors waiting for regulatory clarity so they can double down on their [crypto] investments in India,” said Sumit Gupta, cofounder of CoinDCX.
India has seen increased investment activity in the web3 space as well, with traditional funds setting up teams to lead these investments.
Shekhar Kirani, partner at venture capital fund Accel, said, “As far as technology goes, Web3 is as big as or bigger than the Internet. There will be some huge changes but the best companies will come out of this sector. Investment momentum is building and will continue, though there may be some correction on valuations.”
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Regulatory scrutiny on crypto
Major economies around the world have begun devising strategies to regulate crypto assets. On March 10, US President Joe Biden signed an executive order requiring the government to assess the risks of cryptocurrencies and look into the benefits of creating a digital dollar.
On March 9, Dubai unveiled a new agency that will draw up rules for virtual assets as its leaders look to solidify its position in the emerging digital economy.
In India, Finance Minister Nirmala Sitharaman proposed a 30% tax on returns from digital currencies and a 1% tax deducted at source (TDS) on all transactions involving digital assets in the 2022 budget. Following the announcement, which was largely hailed by stakeholders as a step forward, the crypto industry has made multiple representations to the government, asking for the tax slab and TDS to be reduced.
The 1% TDS is particularly detrimental to day traders, according to industry stakeholders, as it makes trading in crypto prohibitively expensive. The industry is consulting with government authorities to reexamine the proposal and provide clarity on several points.
