Inside the break-up of India’s largest crypto industry body

After the dismantling of the Blockchain and Crypto Assets Council (BACC) last week by the Internet and Mobile Association of India (IAMAI), crypto exchanges are likely to meet this week to discuss the way forward as they look to create their own independent body or join other industry bodies.

While the move came as a shock, the exchanges are putting on a brave face and say they see this as an opportunity to create an independent body.

The move, which came as a surprise to the industry, is “quite odd unless there has been pressure”, said an industry watcher. Crypto companies are also deliberating approaching other larger industry bodies such as FICCI (Federation of Indian Chambers of Commerce & Industry) to join them as an extended arm.

“I am anticipating that the meeting to discuss the next steps will happen sometime this week. It will either be an independent body or we might reach out to other larger bodies,” Sathvik Vishwanath, Co-founder & CEO, Unocoin told Moneycontrol.
“Based on our experience with IAMAI, I believe that the industry is heading for an independent body. Exchanges could approach a larger business industry body but that is yet to be seen,” a source closely working with one of the leading crypto exchanges told Moneycontrol.

BACC was the largest industry body in India for cryptocurrency players. It was made up of exchanges, also blockchain and token developers, as well as non-fungible token (NFT) marketplaces. Members were both Indian and international companies.

A sea of troubles
According to industry sources, BACC was being used for three key functions—including strategising representations to the government after discussions with tax advisors and lawyers, pooling money to fund research reports and legal fees, and putting out statements to various ministries in case there were disagreements. “But crypto exchanges themselves were setting up meetings with government bodies and drafting letters and representations, while IAMAI leaders delayed processes by days and weeks to finalise those letters,” said a senior crypto executive, requesting anonymity.

Vishwanath and the source cited earlier reiterated that there were no decided regulations as of now for crypto exchanges to follow.

Last week, sources told Moneycontrol that while IAMAI believed in the technology, it wanted to call out the wrong practices in the industry, referring to exchanges “not following through the demands and requirements of the government as decided during the meetings with government bodies”.

 “We had written a self-regulatory framework. From my understanding, all exchanges are following it but given that the IAMAI also represents other fintechs and insurtech companies (through the Payments Council of India), they have taken a stand that they don’t want to have crypto as a part of IAMAI. They were also quite slow in going from one step to the next step, that’s why some member companies, even though a part of IAMAI, were setting up meetings themselves,” Vishwanath said.

A few senior executives at crypto exchanges also said that BACC and IAMAI failed to resolve the banking issue for crypto exchanges, which was a major reason for their trading volumes dropping.

In April, after Coinbase ventured into the Indian market with its UPI payment mode, the National Payments Corporation of India (NPCI) issued a statement saying it is “not aware of any crypto exchange using UPI”.

Post this, the UPI payment mode was halted for many exchanges. Moreover, even the Mobikwik wallet stopped supporting crypto trading, which led to a further decline in crypto trading.

Taken by surprise
Over the last few months, as these events played out, cryptocurrency exchanges and platforms considered breaking ties with IAMAI and forming an independent industry body. Many started to hire in-house policy heads to help them navigate legal and policy discussions. But before they had finalised a plan, IAMAI wound up BACC, a move that came as a surprise for many crypto exchanges, industry players told Moneycontrol.

“The suddenness of the decision was a surprise. But, in hindsight, it makes sense. With NPCI's stand on crypto, they would have felt pressure due to the PCI angle. From a business standpoint, they had to cooperate with PCI and NPCI,” said a senior executive at a crypto exchange.

There is an American parallel to the events that have played out in India. WazirX’s parent Binance US exited the Washington DC-based lobby Blockchain Association in April citing “values, goals and standards not aligning”. Binance, which is the world’s biggest trading platform, is now looking to create an in-house lobbying group.

Closer home, the troubles seem to be far from over for crypto exchanges as Finance Minister Nirmala Sitharaman on July 18 said that the Reserve Bank of India (RBI) had recommended that the government completely ban cryptocurrencies.In search of a voice

“When some of the unhappy members additionally joined another body, IndiaTech.Org, many IAMAI members didn’t take it well,” the source cited above said. IndiaTech.Org counts four top exchanges as its members, including CoinDCX, CoinSwitch Kuber, WazirX and ZebPay.

“We had always held that regulations should be the way forward for this sector and had released whitepapers with detailed recommendations last year. Post this, the major exchanges joined us to give further support to this approach. We also had interactions with the government and RBI to take this thought process forward,” said Rameesh Kailasam, CEO of IndiaTech.org.
He adds that whether more crypto firms join IndiaTech or form their own body is for the industry to decide.

But more importantly, Kailasam says that there is much more in this ecosystem that needs a voice as BACC did not consist only of exchanges. There are many other entities, including blockchain and token tech companies, NFTs and their marketplaces, and global firms, who will all need to have a voice to further their cause.

IndiaTech.Org is an industry association representing India’s technology start-ups, unicorns, and investors and engages with several ministries and regulators to enhance the ease of doing business.