With Coinbase going public this week, crypto passes an important milestone. The $100 billion-plus listing validates the industry on Wall Street and could catalyze a new wave of crypto startup funding.
But, even now, we’re only at the very beginning of what this tech can do. We’re passing through the validation stage to the point where things get really interesting. We’re about to see what happens when millions of people start using radically new forms of money, with all the economic consequences that flow from that.
For a taste of what could happen next, it’s worth reading Balaji S. Srinivasan. A former Coinbase CTO and board partner at VC firm Andreessen Horowitz, Srinivasan is a genuine big-thinker with a history of making ahead-of-the-curve predictions.
Srinivasan recently wrote about how India could adopt a digital rupee and a series of “national software stacks and neutral crypto protocols,” helping its entrepreneurs to get funding and leapfrogging a less-than-modern economy into the future. His mercifully clear “Add Crypto to IndiaStack” essay should be required reading for policymakers trying to work out what the crypto fuss is about.
The existing IndiaStack is a robust set of APIs for mobile payments (UPI), identity (Aadhaar), KYC (eKYC) and much else. Srinivasan proposes that India add a digital rupee and wallet to this, allowing citizens to move money between mobile phones without going through banks.
After that, he suggests, the wallet can be enabled to accept other select forms of crypto, allowing entrepreneurs to access pools of overseas capital, including the billions already moving around decentralized finance (DeFi). This can help address India’a SME “funding gap,” which is estimated at $250-500 billion.
“By adding both a digital rupee and crypto support to IndiaStack, we could turn every phone into not just a bank account but a bonafide Bloomberg Terminal, giving every Indian the ability to make both domestic and international transactions of arbitrary complexity, attracting crypto capital from around the world, and leapfrogging the 20th century financial system entirely,” Srinivasan writes.
DeFi replaces a world of paper contracts and law enforcement with smart contracts and on-chain transactions that take out the middlemen in lending and credit. “The ability to write programs with money is as big a breakthrough as the ability to write programs with documents. It gives Wall Street's capabilities to anyone – including the average Indian – without expensive lawyers or financiers,” he writes.
Indian officials have shown a disdain for crypto trading up to now, even threatening to ban it recently. But Indians have shown a lot of interest in bitcoin. Srinivasan shows how the underlying tech might become acceptable: i.e. within a government-organized program.
The involvement of any state bodies in the emerging crypto-economy will be an anathema to some. But governments won’t want to be left out, especially as China (India’s great rival) develops its own powerful crypto stack, including a digital currency and a blockchain-based services network.
Srinivasan sees IndiaStack as a way to escape the control of the legacy American-run financial system and the emerging Chinese-blockchain nexus. India can put itself at the forefront of a new “non-aligned” movement (what he calls the "Decentralized Movement"). Instead of swapping American surveillance for Chinese surveillance, he argues countries can align themselves with the ethos of Bitcoin and Ethereum “that all of them benefit from but none of them control.”
Today, Coinbase. Tomorrow, the world.