60 Minutes | Economy

Ignorance driving the state to clamp down on crypto-exchanges, says Mohit Kalra

 India doesn’t have to reinvent the wheel to come up with cryptocurrency regulations: Mohit Kalra

India doesn’t have to reinvent the wheel to come up with cryptocurrency regulations: Mohit Kalra

In August 2014, Mohit Kalra stood meekly by a swimming pool, arms crossed over his chest, shoulders hunched, head bowed, as his colleagues emptied two full buckets of icewater on his head.

Wet and shivering, he announced that the company he had recently co-founded would donate five bitcoins to the Amyotrophic Lateral Sclerosis Association (ALSA) as part of the ALS Ice Bucket Challenge.

Why five bitcoins? “Back then, one bitcoin was worth ₹20,000. We wanted to donate ₹1 lakh,” Kalra says.

Today, one bitcoin is worth about ₹6 lakh, depending on the time of day (as of Feb.8). The ₹1 lakh that Kalra’s ice bucket challenge delivered to ALS is now worth around ₹30 lakh. The return on investment is a mind-boggling 30,000% in three years. “Hope they haven’t sold those five bitcoins,” I say. “They haven’t,” says Kalra. He knows because the ‘coins’ are still there in the ‘wallet’ where he had put them.

Kalra, 27, is the chief executive officer of Coinsecure, India’s first cryptocurrency exchange to offer real-time trading, and one of the largest in terms of trading volume. We meet at his office in Pitampura’s Netaji Subhash Place.

He is dressed in ‘extreme casuals’ — black T-shirt, leather jacket, and jeans that appear to have been ripped by a samurai performing seppuku on faded denim. High value metal adorns his wrist and fingers. Mounted on the wall behind his desk — and on nearly every wall in the office — is the bitcoin symbol, a ‘B’ superimposed on two vertical lines.

“I am a Class X dropout,” says Kalra, who hails from a business family. His father owns Toni Zippers, one of India’s largest zipper manufacturers. The ‘dropout’ eventually finished Class XII, but his formal education ended with the school-leaving certificate.

“I was into music and tech. I did a music production course from Bengaluru, and came back to Delhi to build a professional studio in my house. I used to make EDM (electronic dance music) and even released a couple of tracks in 2010-11,” he says, adding that his favourite EDM artist is deadmau5 (pronounced ‘dead mouse’).

EDM to Bitcoin

In 2010, Kalra went to Singapore to attend a music conference. “The hotel I stayed at was hosting a conference on ‘new money’. Curious, I went in. That’s where I heard about bitcoins for the first time. Jeff Garzik was talking, and I sat there listening to him for one-and-a-half hours. Then I met him after the conference. He said to me, ‘Stop doing everything else and start mining.’”

Banks may freeze our rupee accounts but no one can freeze our bitcoin accounts. If required, we will move out of India, go global.

Kalra spent the next three years mining bitcoins. “During this period, I became the largest bitcoin miner in India.” He turns coy when I ask him how many bitcoins he mined. “You want to send the tax guys after me?” he laughs, before adding, “I was kidding. I’ve declared all my bitcoins, and paid taxes on them.”

Three years devoted to mining, that too in the early days when the difficulty levels were much lower, would mean a huge treasury of bitcoins. “Yes,” admits Kalra, “I did mine a whole lot. When others were mining from laptops, I was using graphic cards. By the time they switched to graphic cards, I was using miners with ASIC (Application-Specific Integrated Circuits) chips.”

A ‘miner’ is specialised hardware that packs tremendous computing power. “The more computing power you have, the more rewarding mining will be,” says Kalra.

In mid-2011, Kalra went to China, the world leader in bitcoin mining. “I had contacts in China, thanks to my father’s business,” he says. Kalra flew back with 20 miners’ worth of ASIC chips. “One board of ASIC chips can mine as much as 200 graphic cards,” he explains. “I set up 20 such boards.”

When Kalra began mining, a bitcoin cost barely a dollar. He hoarded them, expecting the prices to go up, and they did — to $100, $200, $400, $500.” When it touched $600, Kalra was no longer sure if he should hang on to his hoard. What if the prices crashed?

“I sold most of my bitcoins for $600 as it was a huge price for me (about ₹38,000). From a few dollars to $600 was a massive jump.” For the record, the value of a bitcoin today (as of Feb.8) is in the region of $8,000. Perhaps he should have waited. Yet, it was while trying to sell his bitcoins that Kalra came up with the idea of an exchange.

“Selling was a big problem. I got really stupid prices in India. I was forced to sell for $300-$400 when globally, bitcoin was trading at $600. This got me thinking about why there was no proper exchange in India where anyone could place an order, buy, or sell bitcoins. That’s when I decided to build Coinsecure.”

By 2013-end, Kalra had given up mining and was fully into setting up a cryptocurrency exchange. He co-founded Coinsecure with Benson Samuel, the company’s Chief Technology Officer, in mid-2014.

“We began with just four people, in a small room in my father’s office in Wazirpur,” Kalra recalls. “Today, we are about 30 people. Our trading volume is the largest in India — around 300 bitcoins or ₹15-20 crore a day — and we have more than two lakh registered users.”

Go global

Interestingly, in late 2016, Kalra was on the verge of closing down Coinsecure. “Our trading volumes weren’t picking up. We weren’t making money. So I was seriously thinking of shutting shop,” he says. And then demonetisation happened. “Almost immediately, the volumes began to go up.” Coinsecure acquired new users at a fast clip. Demonetisation had managed to do for cryptocurrency what even a multi-million dollar ad campaign may not have: get people to question their trust in fiat currencies and seek out alternatives.

“Look at what happened in Syria,” says Kalra. “After war broke out, the Syrian pound lost 90% of its value. When a state collapses, so does the currency. But bitcoin is a global currency. No government controls it. It is immune to political instability.”

I ask him why the Indian state hates cryptocurrency so much. “I don’t know, I guess it’s just lack of knowledge,” shrugs Kalra. “They cannot ban us outright, since terming our operations as ‘illegal’ still requires some regulations, and they have none. So they are harassing us unofficially, by getting banks to suspend the accounts of crypto-exchanges.”

But Kalra doesn’t like to complain. “If an industry is disruptive, one must be prepared for situations like this, and we are. Let me say this openly: even if the government shuts down our bank accounts and bans bitcoins, Coinsecure’s cryptocurrency services will not stop. Banks may freeze our INR (rupee) accounts but no one can freeze our BTC (bitcoin) accounts. If required, we will move our business out of India, go global.”

If they ban bitcoins, we will operate as a crypto-to-crypto exchange. We can manage without the rupee.

The young techie is also struck by the irony of it all. “Last August, we raised $1 million. We are India’s first bitcoin company to raise funds at a valuation of $10 million. So many foreign investors want to put money into Indian bitcoin companies. But the Indian government wants to drive home-grown bitcoin companies out of India.”

But isn’t the government crackdown aimed at combating tax evasion? “By tightening the screws on bitcoin exchanges, the government is doing the opposite,” says Kalra. “Every user on a bitcoin exchange has had his KYC verified. All the money comes via bank accounts. We have the complete money trail. If the government wants to scrutinise transactions for taxes, they can access all the data through us. But if they clamp down, as is happening today, then all bitcoin trading will shift to cash. There will be no records then, which is how you prepare the ground for a black economy. That is what is happening now.”

Kalra also believes that the government is confused because it is not clear who should frame the regulations. “If bitcoin is a currency, which it is, then the Reserve Bank of India should frame the rules. But if it’s a security, which it also is, then it is up to the Securities and Exchange Board of India to make the regulations.”

But India doesn’t have to reinvent the wheel to come up with regulations, says Kalra. There are already working templates. “Look at Japan,” he says. “It has made bitcoin a legal currency. You can walk into a bank there and ask them to give you bitcoins. It is accepted in more than 2,00,000 stores. I think India hasn’t looked at other markets properly. That’s why they have no clue how to regulate cryptocurrencies.”

In the meantime, despite the regulatory uncertainty, Kalra has big plans. At present, his exchange offers only bitcoin trading. But he is about to add five more cryptocurrencies: Ethereum, Ripple, Bitcoin Cash, Ethereum Classic, and Litecoin.

This is in keeping with his long term strategy of insulating his business from whatever the government may throw at them. “Even if they ban bitcoins, Coinsecure will survive,” he says. “We will operate as a crypto-to-crypto exchange. We can manage without the rupee.”

But isn’t there something to be said for the government’s caution? Aren’t bitcoins tainted by association with drug trade, scams, terrorism, money-laundering, and tax evasion? “Sure,” says Kalra. “Bitcoin was launched only in 2009. Tell me: Was there no drug trade, scams, terrorism, money-laundering, and tax evasion before 2009? If there was, why didn’t we ban the rupee?”


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Printable version | Jul 6, 2022 10:27:59 am | https://www.thehindu.com/business/Economy/ignorance-driving-the-state-to-clamp-down-on-crypto-exchanges-mohit-kalra/article22705455.ece