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A venture capitalist says emerging markets, particularly India, are becoming hubs for Web3 development due to attractive funding, talent, and ecosystems.
India: Go-to Place for Recruiting Web3 Companies
According to Tak Lee, CEO of Hashed Emergent, the declining share of Web3 development activity in North America and Europe is being offset by a surge in emerging markets, which offer “more attractive funding opportunities and conducive community ecosystems.” Additionally, Lee, a veteran venture capitalist, notes that emerging markets provide access to top-tier talent at a lower cost, prompting global Web3 companies to focus their recruitment efforts in these regions.
Focusing on India, which has become a top hub for Web3 development, the CEO of Hashed Emergent told Bitcoin.com News that the country’s emergence as the go-to place for Web3 companies seeking skilled professionals stems from its “decades of leadership in IT and software development.”
The CEO argues that this leadership has created a large pool of talent that can adapt to emerging technologies like blockchain. To support this claim, Lee cites a 2023 report revealing that India housed over 1,000 Web3 startups.
Lee, who spearheads investments in emerging markets, acknowledges that India’s Web3 sector still faces significant challenges. These include the applicability of taxes, lack of clarity on AML/KYC compliance, and narrow regulations that impact operations. Shadow bans on Web3 companies by some banks further hinder the industry’s full potential.
Regarding the Indian Blockchain Week, which Hashed Emergent co-organizes, Lee says the goal is twofold: to unite the grassroots of the Indian Web3 community and to spotlight India’s blockchain economy to global Web3 leaders, fostering collaboration opportunities.
Below are Lee’s answers to all the questions asked.
Bitcoin.com News (BCN): India’s status as a global hub for Web3 development is rising. According to a report, 12% of the global share of Web3 developers reside in India. Could you give an insight into what may be driving the rise in developer activity in India and the emerging markets in general?
Tak Lee (TL): India’s unique confluence of technical expertise, entrepreneurial mindset, and demographic strengths are some of the main reasons for its rising potential as a global hub for Web3 development. With decades of leadership in IT and software development, the country has cultivated a vast reservoir of skilled professionals who seamlessly adapt to emerging technologies like blockchain. As tech careers remain to be a top career choice for students this talent pipeline can be expected to grow.
We have seen a rise in entrepreneurs exploring blockchain solutions leading to increased developer activity in the country. We reported in our 2023 report that India is currently home to 1000+ Web3 start-ups driving innovation in the sector. offering quality talent at a relatively cost-effective option, it continues to attract both domestic and international projects.
India’s web3 ecosystem is primarily driven by its young and tech-savvy population who views as the next transformative chapter in the internet’s evolution. Web3 functionalities such as democratized community building, access to global opportunities, and self-sovereign ownership have captured the imagination of this demographic. Indian developers are also actively participating in global blockchain communities, becoming a cornerstone for Web3 innovation.
BCN: The report mentioned above shows that while Web3 activities are heating up within emerging markets, North America, Northern & Western Europe, Australia & Pacific, and Eastern Asia collectively lost 23% share since 2018. What do you think is behind the decline in Web3 development activity in the listed regions. Is the situation a case of relocation by existing developers or a natural decline amid the rise in the other regions?
TK: Instead of seeing it as a decline elsewhere, we see it as a redistribution of opportunities in emerging markets due to multiple factors. Markets like India are offering quality talent at a more competitive cost, further attracting global companies to focus hiring activities in these regions.
As we notice more favorable regulations in parts of Asia, particularly in the UAE, Singapore, and Hong Kong, it is natural for developers to relocate to such parts but it is also stirring up web activity within the region, boosting the existing talent pool.
With attractive funding opportunities and conducive community ecosystems, blockchain projects and developers are more attracted to these markets. We see it as a sign for globalization of Web3, with underdogs taking a prominent role in driving innovation.
BCN: Among the emerging Web3 markets, India claims the leadership position in development activity. However, that does not mean it is exempt from challenges or potential limitations. From your perspective, what are the main challenges facing the Web3 sector in India?
TK: We outlined some of the main challenges that India is currently facing in our 2023 joint report. While the landscape has evolved from a complete ban to understanding the underlying difference between the technology and its applications, a classified framework can prepare India’s potential in the Web3 sector.
The regulators’ mixed stance on Web3 due to perceived macroeconomic risks, has left the country with unregulated foreign exchange inflows and outflows. The fact that a system could lead to a parallel currency creation, could be a massive shift in typical governance frameworks, especially in a dynamic market like India.
Heavy tax applicability continues to be a roadblock for certain Web3 transactions and is challenging end-user rights and protection. Narrow regulations and a lack of clarity on AML/KYC compliance, CEX functions, are impacting business operations and the absence of tax classification with other asset classes exacerbate these issues.
Such intricacies are compounded when the banking ecosystem, despite Supreme Court rulings, impose shadow bans on Web3 companies. A negative policy tone, where the sector is often dismissed as speculative, undermines the achievements of India’s thriving Web3 developer community and the $3 billion investment into the industry.
While the government’s focus on public-sector blockchain projects and CBDCs can be perceived as its openness towards Web3 innovation, it risks sidelining private-sector innovation on open, permissionless blockchains. All these factors have resulted in businesses and talent to relocate off-shore leading to brain-drain and can limit the country’s potential.
BCN: Can you elaborate on the Indian Web3 landscape, focusing on the evolving regulatory framework and how it is affecting the industry’s development?
TK: India’s Web3 landscape is constantly reforming its course, especially for crypto-assets and cryptocurrencies. The country transitioned from an outright ban in 2018 to uplifting it in 2020, moving to taxing virtual digital assets (VDAs) in 2022. Last year, AML/KYC registration and compliance for Virtual Asset Service Providers (VASPs) were introduced, with a mandate for offshore VASPs to register in India by 2024. This evolving trajectory is signaling towards clear regulations, which can give some relief to retail and institutional players.
From a global standpoint, India is uniquely positioned to learn from other markets. Jurisdictions such as the EU & Dubai have chosen to enact new legislation whereas Singapore, Japan & Hong Kong amended existing laws to regulate VDA activities. We believe that it will be in the Indian Web3 industry’s best interest to adopt informed and tailored regulations embracing its potential and addressing its distinctive architecture, rather than a neutral approach.
From a policy standpoint, we believe that a receptive approach welcoming global players, liquidity, and trust into the Indian Web3 ecosystem, will be essential in shaping the future. As witnessed in the recent US elections, the Indian Web3 ecosystem and its VDA activities are expected to play a decisive role in future political and policy discussions appealing to a valuable voter demographic.
BCN: Many tech analysts believe that Web3 will have the greatest impact in emerging markets because blockchains can initiate a cycle of economic activity and growth in regions lacking trust. Do you agree with this assertion? If so, can you explain the specific areas where blockchains can play significant roles in achieving the projected outcomes?
TK: We agree with the assertion, as blockchain is a combination of competence and intent, and research shows that trust has a greater impact on economic growth in emerging markets than in the developed world. Our thesis for web3 in emerging markets is that the introduction of new blockchain-based financial and legal primitives will be particularly impactful in these regions and can spark a flywheel of economic activity and growth.
Increased levels of trust and the strengthening of property rights and contract enforcement in web3-enabled business models will provide new economic opportunities for people and enlarge the overall economic pie. We believe local founders with local context will create new business models using blockchain technology to solve their own (but locally shared) problems.
With a trusted and transparent system, DeFi has immense potential in transforming financial services from savings, investments, lending and payment systems, driving financial inclusion to the underserved population. Reliable alternatives like stablecoins and tokenization of real-world assets (RWAs) can unlock new investment opportunities with a complete control over assets, democratizing access to real estate, commodities, and business ownership, promoting an inclusive economic growth.
BCN: Hashed Emergent, the Web3 venture firm that you lead, is organizing the second edition of the Indian Blockchain Week conference in December. Most people consider it a notable tech event in the region, considering the industry’s heavyweight it attracts. What motivated Hashed Emergent to take on the responsibility of hosting such an event?
TK: Hashed Emergent is purpose-built to unlock the emergence of a distributed ecosystem. As a group company of Hashed, it was set-up with local teams to add value to the grassroots Web3 ecosystem in the target regions. We have always been focused on building a strong Web3 ecosystem in India with our community activities consisting of multiple formats of events, targeting students, developers, entrepreneurs, and general audience to raise awareness and catalyze mass adoption of blockchain technologies.
With a focus on providing an informed approach to the country, we publish our flagship annual report ‘India Web3 Landscape report’ to capture the state of the market in all facets. We hosted our inaugural edition of ‘Protostars’- an accelerator focused on supporting young builders. Hosting a conference that acts as a bridge between the global and local Web3 communities was a natural progression of our activities at the highest level. The India Blockchain Week 2024 Conference, happening on 4th and 5th December at Sheraton Grand in Bangalore is the headline event of a week-long Web3 festival.
Hashed is also a cohost at the wildly successful conference, Korea Blockchain Week (KBW), which has empowered the Korean web3 ecosystem. The milestones achieved through these conferences have been our inspiration to move forward.
BCN: Can you briefly highlight the goals of the Indian Blockchain Week and what your team aims to achieve by hosting the event at this time?
TK: The overarching goal is to spotlight India’s blockchain ecosystem among global leaders to open collaboration avenues. The specific goal is to unite the grassroots of the Indian web3 community and to empower them in enabling a supportive Web3 revolution.
We believe that such large-scale events with global exposure will be instrumental in spreading awareness and catalyzing mass adoption.
BCN: According to many blockchain and Web3 proponents, the emerging technology can play a significant role in enhancing cross-border investments and bridging the gap between formerly separated regions. Can you explain how this is possible, citing the limitations of the existing systems and how Web3 implementation will tackle such challenges?
TK: Current financial rails suffer from several limitations including high transaction costs, long settlement time, and overtly manual process, making cross-border investments inefficient and costly. Blockchain’s instant finality is transforming the traditional investments outlook by reducing delays and transaction fees, offering first-ever seamless methods for cross-border exchange. With zero counterparty risk involved, Web3 technologies provide greater security and transparency for these transactions.
By enhancing operational capabilities of the traditional financial rails, Web3 is making investment easily accessible between formerly separated regions. It can significantly enhance cross-border investments, fostering greater global economic integration and opening up new opportunities for regions.
BCN: What are your general thoughts about Web3 and crypto adoption by institutions in India?
TK: Indian institutions have strong precedence in developing and adopting innovative tech stacks, like UPI, ONDC, Finternet, among others, influencing financial and digital ecosystems globally. Considering India’s digital architecture is in its early stages, Web3 integration will enhance transparency, efficiency, and scalability across industries.
Currently Indian institutions can learn from its global counterparts to work on its regulatory framework and reduce uncertainties. Addressing tax and compliance hurdles through well-informed policies based on practical parameters will be critical in unlocking the full potential of institutional Web3 adoption.