The Pomp Podcast - Ajeet Khurana, CEO of Zebpay: India's Clampdown on Cryptocurrency

Episode Date: April 30, 2019

Ajeet Khurana is the CEO of Zebpay. In this conversation, Ajeet and Anthony Pompliano discuss the lightning network, exchanges, business models, and the current environment for crypto in India. ----- Curious about Cryptocurrency but don’t know where to begin? Storm Play is a free and fun way to start earning in exchange for you time. Simply download, register and discover microtasks that meet your interests and be rewarded with Storm Bolts. These Bolts can then be converted and withdrawn into your favorite cryptocurrency, including Storm Token, Ethereum (ETH) and Bitcoin (BTC.).  Earn cryptocurrency rewards by playing new games and trying out cool products! Download the app to start earning crypto here! https://bit.ly/30pSxh9 (Available for iOS and Android). ----- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by BlockWorks Group. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworksgroup.io

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off The Chain, simply the best podcast in crypto. Let's kick this thing off. Ajit Khurana is the CEO of ZebPay. In this conversation, we discussed the Lightning Network, exchanges, business models, and the current environment for crypto in India. I really enjoyed this conversation and i found that ajit had very unique perspectives i hope you enjoy it nearly as much as i did storm play is a free and fun way to start earning cryptocurrency in exchange for your time you can simply go to the app store download register and then discover micro tasks that meet your interest and you're rewarded with storm bolts these bolts can then be converted and

withdrawn into your favorite cryptocurrency including storm token ethereum and bitcoin Again, you can earn cryptocurrency rewards by simply playing new games and trying out cool new products. Go to the App Store today and download Storm Play. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a

particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. Bang, bang. All right, guys, I am here with Ajit. Dude, thank you so much for doing this. I really appreciate it. It's absolutely my pleasure. Thanks for having me here. Absolutely. All right. So let's go through your background and then we can talk about um you know what you guys are doing at zeb pay uh and uh kind of your future thoughts on crypto but let's start with background first so i uh personally have been associated with the startup space for a long time now decades actually have been entrepreneur twice so i sometimes think i'm

qualified to be called a serial entrepreneur got interested in crypto um about 2014 thought it was absolutely bizarre and irrational looked away but could not keep my attention away and in 2016 i got september 2016 to be precise got very interested in it started investing money started digging deep doing a coursera course on it and the like met the founders of zepay shortly thereafter and started sharing my thoughts with them they were india's largest exchange at that point of time uh cryptocurrency exchange primarily fiat to crypto uh doing uh you know about two-thirds to three-fourths of the market volume of all of india and i helped them set up an industry association for all the players of india there were attempts even prior to mine but mine worked

relatively well shortly thereafter because i would work closely with all members one of the members zeppe said you know what forget the industry association we'll run that for you but you come and join us. And in January of 2018, I joined as CEO. Got it. And so, uh, before you, you did that though, where, uh, you went to what, uh, UT Austin, right. And, uh, and then, uh, moved back to a Singapore. No. So I've been in Singapore only for a couple of months. I did my engineering and undergraduate degree in engineering from India. I did my MBA from the university of Texas at Austin. um having done that i was entrepreneurial for six and a half years at which point of time a company funded by intel capital decided to acquire educational assets in india mine being

the first became retired at the age got retired at the age of 30 uh continued to be in retirement for four years then retirement became very difficult and i realized that working life was much easier came back out of retirement got entrepreneurial again in a related field as the first one coincidentally was an entrepreneur again for six and a half years and at this point of time the burden of the global economic crisis which kind of hit us in end 2008 sank my business and slowly sank my business 2010 to 2014 I was a full-time angel investor also an evangelist for the startup space helping startups etc and subsequently in venture capital for some time joining a business incubator at one of india's leading engineering schools for some time

and then comes crypto uh zeppe was india only based when i became the india ceo ran into regulatory hurdles which still continue to plague the indian crypto scenario and we decided the time was right for Zeppe to foray internationally, something it had been talking about and thinking about for a couple of years, even before my joining, but the market was growing so rapidly that there was not a moment to, you know, think about anything else. This gave us a breather. So towards the end of 2018, we tried to become a global player, incorporated in Malta, had a holding company in Singapore. Now I'm resident in Singapore. Got it. Very cool.

And do you remember the first time that you came across Bitcoin or crypto? The first time I came across it seriously was in September 16. But the first time I heard of it, I'm embarrassed to say, was as late as 2014. And I got attracted to it primarily by looking at its price graph. Because whenever there's volatility, whenever things move fast, there could be an investor slash trader opportunity. And I have been an investor, A, all my life. And B, my investment background is in, you know, trying to find opportunities which others may not have fully appreciated. So that was the first time I came across crypto. Very cool. And so talk to me a little bit about kind of how you viewed, you know, Bitcoin and crypto really in those early days, right?

Was it something that you just got super excited about? You're like, oh, this is the future I'm all in from day one? Or was it something that kind of took a little bit more time for you to learn about and kind of navigate? So I had two phases. In the first phase, I looked at crypto. And because I have, you know, all my life been an investor in traditional asset classes like bonds, mutual funds, equity, and the like,

as well as in esoteric classes such as stamps art comic books and stuff so using all of what i knew around you know the traditional world of finance when i first saw crypto it seemed bizarre to me as in you know all the basic questions as to you know who makes crypto who regulates crypto you know how you know the first timer would think so pretty much like i now see a lot of first timers react my reaction was as well in hindsight as silly as that and i said no no no this is not something that will work and i must tell you i reached that ignorant conclusion without trying to figure out the underlying technology luckily for me very luckily for me uh you know crypto continued to wow an increasingly large number of people

It continued to give very interesting price graphs. So I kept getting repeatedly interested in it. And then when I reached 2016, which was two years after I first looked at crypto, I started underlying, I read Satoshi Nakamoto's white paper. I did the Coursera course on Bitcoin, which was really the only course available at that time. And I read up about it. I started talking to people and I said, gosh, how ignorant I have been for the last two years. And I realized that, frankly, it is not anybody's opinion. Cryptocurrency is an inevitability.

It is not what I think about it, because what is going to happen is going to happen. And that is where I said, you know what, despite the fact that the average age of people in crypto tends to be like half my age, uh but i want i definitely want to align with the future and the obviousness of the power of this decentralization uh you know hit me and that's what brings me here today for sure and then why uh why exchanges why focus on kind of uh the exchange business within crypto right obviously there's you know hundreds of exchanges at this point what's kind of your thought there in terms of why that's a great place to uh uh to focus so what happens for a lot of us in our careers is that it's a sequence of steps that takes you to a particular point. And when you

reach a particular point, you may have a question like, why exchanges? But if you look at what brought you here, so first of all, there weren't hundreds. When I was dealing with them, there were four. There were four exchanges of any consequence in India. And because of huge capital control norms, India was an isolated market. Indians could only trade on Indian markets, which would explain why the prices used to usually be 5 to 15 percent higher in the domestic Indian market than otherwise. So I did not, when I started, I did not perceive there as being hundreds of exchanges. Today things are different. Secondarily, I was and continue to be very impressed with the founders of Zeppe. And what they told me is that when they started Zeppe in 2014, they first started

it as a wallet business a crypto wallet business and then they realized that not too many people had crypto to begin with and they probably needed to be at that end of the spectrum where they help people enter crypto so that is why they decided to not continue the wallet business but instead became an exchange and instead of being a global company based out of singapore they became a local company based out of india because the crypto movement had barely started as in hardly anybody had heard of it. So I think that it is a sequence of steps that got me to the place I am at. However, I do agree with the significance of your question in that why exchange? I think that some form of swap, whether it's a DEX or whether it's a centralized exchange like Zepay is today,

will continue to exist as long as there is more than one digital asset. And I imagine there will always be more than one digital asset. But going forward, I agree that if we are only limited to thinking about crypto as being an exchange just because the biggest crypto businesses are back today, then that goes against the ethos of crypto and it is extremely limiting. So I don't see my future or Zepay's future as being an exchange-only future.

But this is where we are today. Got it. And so as you look out at that, right, there's so much technology that's being built, whether it's certain types of tokens, whether it's things like Lightning Network or other infrastructure, How do you envision many of the exchanges today kind of evolving over time?

Where do you see that evolution coming into play? So there are two opposite but simultaneous forces that are working on all industries and most notably the crypto industry. One is the early adopter, bleeding edge, front of technology kind of people who are ahead of the pack. the good thing is that these are the guys who show us direction we like to think of zepay you know headed in that direction not quite there yet the problem with these guys it tends to often be that they could be the orchids of the crypto world namely they kind of create the industry but then they don't last they die out while the more stable models emerge and the others are those who are milking the paradigm so for example anybody setting up an exchange today probably is milking the fact

that you know there are so many people in crypto and maybe if i get into something which is already a rising tide then i'll do well so for example lightning is more at the cutting edge does not have mass adoption yet there could come a time where lightning could be something that people are milking because now everybody is doing uh lightning my position is that as long as survival and sustainability are not at great threat frankly survival is always at threat but as long as you are not like bungee jumping without the bungee cord um it should be that zeppe and you know anything i'm associated with should be as close to the cutting edge as possible this is how as a at a model level i think about things if you want to discuss anything specific within this happy to

do so got it and so like let's talk a little bit more about lightning right because we haven't spent too much time on that on the podcast but but i think that there's a lot of people who hear about Lightning, they have tried to look at it. Let's really kind of dig into what's so exciting to you about Lightning, right? Yes, it's a layer two scalable solution, but what kind of gets you excited about the prospects of it? So let me tell you at a framework level, and then we can discuss Lightning specific. When I got into crypto, the number of people who were crypto naysayers uh was greater in proportion as well as volume than it is today and one of the common complaints used to be that you know what are you guys talking about virtual money you can

do like eight transactions a second while the visa network does or somebody else does 2000 or i don't know however many and lightning solves that as in that used to be amongst the rational objections against bitcoin as in there were irrational objections which i don't care for But amongst the rational objections against Bitcoin, the bandwidth of the underlying blockchain was indeed a concern. So the fact that Lightning, through being a layer two solution, actually solves that is huge for me. But more specifically, the fact that Bitcoin can evolve over time. So, for example, I think it was around 2013, I hear, because I was not in Bitcoin then, that the concept of multi-sig wallets came in. I hear that probably a little before that, when the concept of Satoshi Dice came about,

that is where the issues around bandwidth and block size started getting discussed, which were otherwise a non-issue. And the transfer fee or the withdrawal fee went from fixed, which was probably 100 sats, to variable. So what I like about all of this, ending with or coming up to a lightning, is that this shows that this system of digital assets, you can call it the system of money, in a decade has shown greater evolution than most fintech systems have done in much longer than that. And most monetary systems have done like ever. So that is what I like about it. Now, whether Lightning by itself

will become the way transactions take place, you know, I don't arrogate myself the right to crystal ball gaze so much, but it does have interesting opportunities. So that is the way I am viewing Lightning as a tribute to how well or how clearly Bitcoin is poised to capture the future. Got it. And I think, you know, from my personal perspective, the thing that's blown me away is not only the execution of the different teams working on the Lightning network, but also the reception of it. It's just growing so incredibly fast in what's now a little bit over a year. And it feels like in today's world, building the technology, you have to have the teams and the technologists actually executing. But you also need this community aspect. You need

people to buy into, hey, this product works. This product solves the problem I have. User experience meets the standard that I've set and I'm going to adopt it and I'm going to work to get other people to adopt it as well. It just feels like there's an added component in crypto around community and adoption than just, hey, the technology works. So, you know, this is beautiful you talk about that because if I were to leave aside the naysayers who compare crypto to fiat against benchmarks set by fiat and then find that crypto did not turn out to be the fish that could climb up trees but if i were to look at crypto as a technology and i talked so i did my computer engineering way back in the year 1991 so i obviously a lot of colleagues who are in the

computer science space and it space uh one of the complaints they tended to have or remarks that they tended to have was around the fact that hey you know what blockchain technology isn't all that special as in it's slow it is redundant and what is the big deal as in this is not as big as the internet it's certainly not as big as cloud computing etc and what a lot of those people were missing out on was that if you were to think of blockchain only from as a computer scientist it is possible that you may not be as impressed as if you think of it as a social phenomenon so the social dimension to blockchain which is what you know you talked about in the form of community adoption and community behavior the human slash social slash community aspect of

blockchain is what makes it so special. And it is people who miss out on this part and probably want to look at technical specifications only who are probably never going to get it until the whole world has got it before them. So I absolutely agree with you. And the example I gave you around, you know, how the Bitcoin protocol itself has evolved in, you know, multisig and block size and transaction fees and now lightning and the likes. I think that that is a great tribute to a the community and b proves to me beyond doubt that this is something that is needed so for instance in 1998 as a hobby i set up a what was called a portal you know the most common word then was portal which continues to be a word used today

but portal was vertical local kind of websites and we try to sell stuff online in india and we found that uh most people wanted to first touch feel and look at the thing before buying it so these are the very early days of e-commerce and people thought you know what e-commerce never going to take off but there are certain compelling features about e-commerce that make it that make it so attractive and that's why it's grown and traditional retail is at least partially threatened today likewise i believe that the features of crypto there is certain compelling elements around decentralization about being in control about not having to trust trust a central authority uh you know and about the the programmability and the smartness of how you

can transact that are so compelling that uh you know we know this is the future and if you think about all the features i told you about a lot of them primarily are important features only because of the social dimension to it so so that's great got it and so as part of that uh social dimension and some of what you just talked about, it feels like there are different expectations in crypto than in traditional markets. And one of those that we're seeing at Zedpay, my understanding is kind of the zero fee model. So we see this with very few platforms in the non-crypto world. Things like Robinhood obviously kind of made this model famous and workable. But to see this in crypto is very rare kind of talk a little bit about why you guys are doing that um you know

how you're making that sustainable um and and if you guys will continue to do it in the future okay so uh you know let me get to the economics of how we can be a reasonable business despite zero fees uh because obviously there are some fees somewhere right i'll come to that in a second but let me first talk to you about how you talked about the expectations being different in crypto and elsewhere. So here's the deal. I always think that the organization which will win will necessarily, by necessarily, I mean in 100% of the cases, not in most of the cases, is the one that sets the rules. So for instance, if I were to look at some of the problems I have with the exchange world, one, you know, I'm not even going to get into the fact that I think that a lot of

exchanges misreport their volumes which is frankly a disgrace uh but other than that you know the tools used to get people to transact and just keep churning on the next change i don't think are really helping anybody it's not helping the crypto paradigm it's really not helping the traders i don't know if it is really helping the exchanges because fees have anyway become so small so if you take the view that this activity of needlessly high churn uh you know in crypto it doesn't help anybody then you say fine then i'm going to remove the incentive tools to do that right so if i am not going to make money just because the same person with let's say a hundred dollars transact so many times that he generates ten thousand dollars of trade like in a day or

in a week or in a month then at least i know that i'm not contributing to needless churn so i wanted to align myself with what i thought was a natural path of growth of the business secondarily i also believe that if you think about empowering people um decentralizing of power authority action responsibility which is goes fundamentally to the crypto uh i thought it was a good step in that direction so we talked about it long and hard that is it really possible to develop an economic economically viable business model one where you still run a profitable enterprise and bear all your costs and not the kind that is just you know working on venture capital money or growing uh you know at a pace which is great but does not is not profitable if it were possible

to do that with zero fees then that would be the greatest model right and uh we thought about that so that that's what brings us here today now the question is that how can you be a viable business how can you sustain such a thing pretty much like the example of robin hood you gave so if you go to robin hood and you look up their fees there is a large number of fees that they charge or fees that they earn and none of those are transaction fees so we said okay this is good i likened it to let's say a low-cost airline now if a low-cost airline says if you want to fly from point a to point b I'm going to give you like a ticket in $50 or $100. And then when you showed up there, they say, yeah, you know, in addition to those $100,

you need to pay me a fee for entertainment, for breathing the air, for using our time. And then you realize that, you know, they're charging the same fees, but in a different name. Then this is just a gimmick. In fact, it is very misleading. But if they were to say, you know what, I will take you from point A to point B for the $100 you gave me. I will not charge you anything else for this purpose.

but if you wanted other things then i'm going to charge you for that right so something like what in the app world would be called a freemium model so we haven't introduced these freemium features yet but looking back at the last couple of years of zepay's experience in india we saw that the transaction fee which is the commission that the exchange charges on the orders executed it on its order book accounted for about 80 percent of our revenues then there were some other sources such as you know getting a little bit of the withdrawal fees which is the crypto mining fees or transaction fees authorization fees whatever you want to call it some part of that would be left behind because you would not you know you would sometimes charge a little higher

than what the network was charging then some amount of treasury management intelligent financial management, etc. All of these other fees would end up accounting for about 20%. So I said, you know what, if we can keep that 20% constant, forsake the 80%, I just need to have five times more the volume of business. So my 20% into five still gives me the same revenue as the 100%. So I said, and this makes much more sense. Because people can bring in their digital assets, transact on the order book and up to this stage nobody has to pay anything and that is the fact of course i must uh you know so that i'm completely transparent tell you that we also have an otc side of business where people are buying and selling from us as opposed to on the order book in that

we do have a spread right and that spread does not necessarily indicate a fee in fact despite the spread we occasionally could lose money because as we are settling our own uh you know positions but there can definitely be a certain amount of revenue that comes from the otc desk slash otc business also so i think that being a bigger player not charging exchange fees having certain other fees and by the way today we don't charge custody fees we don't charge inactivity fees we have not started charging a lot of the fees which i think that this industry can bear for instance when zeppe was fully operational in india we used to offer 24 by 7 phone support and that used to be free of charge maybe that is something that could be charged so we said you

know what let's focus on getting the volumes in place continue to as in it is at this point my solemn intent to continue to be a zero transaction fee exchange forever that would turn out my solemn desire would turn out to be true if a i'm able to expand my fees on other things which remain continuously uh you know continuously they remain optional for people and b my volumes are sufficient such that i don't have to you know ever reverse my decision of a free exchange in addition i must tell you i think that the time has probably come when we are already looking at zero or even negative maker fees and close to zero taker fees with 0.1 not being exception to the rule 0.2 probably is what most exchanges charge i think we are already at zero it's just

people's in you know unwillingness to accept that zero is the new normal and do you feel like everyone will go to this model or do you think that it's just that you know there's certain uh jurisdictions or geographies where this is going to work or does this actually become the standard across the globe i think this is where crypto will be different than let's say a zero fee uh you know stock broker i think that this should become the norm across every place and if you think about it let's say zeppe starts doing really well as an account which is a top 10 exchange in the world and we are charging zero fees how does that make the remaining nine in the top 10 field or how does that make the remaining 49 in the top 50 field right so people will notice that here is

an exchange which created a compelling argument and maybe this is the model we should look at so exchange there's a second exchange which takes it up and let's say that does well too i think that economics has this invisible hand which you know causes common sense to eventually be accepted the reason i think that in the stock market world things were a little different than in the crypto world is a uh the larger brokerages or what they call the full service brokerages offer services which a certain category of investors values a lot right because there are these hundreds and thousands of stocks to choose from uh there is people who will try to club them in forms of etfs mutual funds etc so i think that the opportunity the the the empowerment that the person the stock

market has of course i'm not referring to a warren buffett like person is relatively low while people who are getting into crypto at least uh the five to ten percent who have aligned themselves with crypto philosophically i think are very empowered so this is where i think everybody's will eventually head. Got it. And so as part of that, right, let's say if you take ZebPay, at one point, I don't know if you guys are still are, but at one point, you guys were the largest crypto exchange in India. Talk me through how in India specifically, you know, you guys build the sustainable model with zero fees. Does that force the rest of the market to immediately go to zero fees? Or is this something that over time, you know, people can kind of

transition there but but it's not just like an overnight reaction to uh to your guy's model okay so i'll just quickly throw out three facts at you because there's a miscommunication number one we are no longer operational in india okay we introduced zero fee several months later probably as much as that was seven to eight months after we had discontinued indian operations so so in india zepa doesn't operate anymore there's no exchange who's licensed to use the name zepa and all of that uh so so i cannot comment on you know what how india would react if and when zp restarts there and has a zero fee model that that remains to be seen as far as so so if that is the case what does your question become so let's talk about india actually let's kind of go deeper on why you

guys aren't operating there maybe just give everyone a overview of um what's transpired in the last you know kind of year year and a half uh when it comes to crypto and regulation in india absolutely so one of my favorite topics to talk about right because not just have i been a significant player in that it has affected me at an emotional level so so let me tell you what happened so pretty much like regulators around the world uh the first reaction of the indian regulator was to pretend that crypto doesn't exist right hasn't just looked the other way that these children are playing something they'll go away and we refuse to go away then the numbers started looking so big that they got worried as to oh my god something really serious

is going on and naturally because of the uh because of crypto being a new field there will always be people who will come in and try to exploit the situation in some format of a ponzi scheme or some scammy giveaway or something along those lines which continues to be prevalent around the world so some bad actors come and somehow start defining the space the police law enforcement etc start looking very closely and they can then distinguish that there are these good players and there are the not good players so that bit that zeppe clearly not just became a good player but a dominant good player then uh comes the question of banks getting active in fact i always tell people that crypto players or market commentators sometime believe that regulators are the biggest

problem for the crypto world in reality bankers are the biggest problem for the crypto world So what started happening is that bankers started shutting accounts, not just of crypto exchanges, but bizarrely, even of individuals who were buying crypto or selling crypto. now that goes out of hand and you should understand this in the backdrop of the fact that the government of India had not until then and has not until the time of today as in until the time of recording this podcast taken any view on the legality illegality methodology policy framework or regulations around crypto so the government has taken no view the central banker had until a certain point not issued any notification as to how it views crypto but banks started acting all by themselves, which creates chaos. And as the level of this chaos

increased, one fine day, which was almost exactly a year ago, because I remember my founders were away to New York City in end March, early April of 2018, when the central banker said that in a certain timeframe, which was three months from then, all central bank regulated entities, which includes basically everybody, credit cards, payment gateways, digital wallets, banks, and all the rest would have to cease offering banking and any other financial services to the crypto industry, which we found was very offensive. Now, if India had taken the view that crypto is illegal. Now, I don't even know what it would mean if somebody said crypto is illegal, but let us just try to not dig deeper than that. But suppose India had taken an adverse view at the government and

policy level, then I would understand the role of the central banker saying that, you know what, we are not going to support you but until this point it was only the central banker who took this position we tried we met everybody but you should also know that when it comes to the government whether it's a securities regulator money regulator enforcement regulator export regulator capital control regulator zeppe was always in touch with all of them because we felt it was our moral obligation to do that as you know the market leader so we talked to everybody and realized that we had reached an impasse so we went to the supreme court had to spend a lot of money on a case that by the way has still not reached its conclusion and there came a time where all

our bank accounts were shut we briefly explored the possibility of being a crypto to crypto exchange uh that did not fly uh as in it's it was a very small business because the indian market was almost exclusively probably 98 plus percent a crypto to fiat market and then the only remaining opportunity for us, which I believe all players other than Zeppe took to, was to become a peer-to-peer trading platform. Now, the problem is that in the kind of regulatory slash law enforcement system that we work in India, I was worried that while I would continue to make my fee, in fact, I could charge a larger fee by you know like a local bitcoins or a peer-to-peer kind of model i thought

that this was very unsafe for our customers because if their counterparty in a peer-to-peer situation tends to be a bad actor it could land our retail customers into serious trouble and a lot of customers who have never been in that you know in the bad books of law enforcement probably do not even cannot even imagine how bad it could seem if you know some really bad actor transacted with them and there were bank account exchanges with them uh so i was extremely uncomfortable in letting my customers do peer-to-peer i presented it to the board our board they agreed with me and they said you know what we are the largest we have transacted over two billion dollars of fiat uh and this by the way number does not probably sound impressive when you look at the crypto

volumes but the crypto volumes we usually talk about are the crypto to crypto daily churn i'm talking of processing fiat worth around 2 billion dollars so they said it's so difficult for us to take a decision to shut operations because we are a one business company which has one stream of revenue and you are saying we need to shut that uh having said that they were philosophically intellectually emotionally morally aligned with me and they gave me the go ahead so around september of 18 i wrote a very small blog post and announced that there is no reasonable way in which the crypto exchange business can be transacted in india uh of course our customers hated that because they relied on us to you know help them exchange we gave people an opportunity to withdraw

their fiat of course they could at any point of time continue to deposit and withdraw crypto if we went through extreme pain and a serious existential crisis like i described we were doing very well so you know when you are going to when you do very well and then suddenly you stop operations what are you going to do so this is the journey we traveled i my my expectation is that sooner or later the supreme court will decide i think probably in the next couple of months but that decision might not be decisive in the way we want it as in if you know they they tell the central banker something or they don't tell the central banker something i think that finally the government of india is going to have to take a view on you know what it thinks about crypto

i have no doubt in my mind that two years down the line three four years down the line india will have a vibrant crypto ecosystem but if you ask me what happens two months down the line and four months down the line i frankly do not know yeah and it feels like to me the government's approach in india uh and i may be wrong on this you correct me if i'm wrong but it feels like the government's approach has been we it's going to be hard to regulate the crypto exchanges uh just given the way that the technology works, right. And, um, and the different assets. So can you shut them down? Can you ban them? Right. All of that stuff is really difficult to do when you have decentralized networks and sometimes even decentralized exchanges. But if you go after

the single point of failure, the reliance on the legacy system, right. You basically go to banks that are non-crypto who want to be, uh, legally compliant and regulatory compliant. And you say to them, you are going to be out of compliance, you are going to break the rules, if you support this industry, these types of companies, etc. That's a really good way to attack crypto without actually going head on having to try to go through the decentralized assets or, or companies. Is that sound right to you? So I must tell you that you are making a judgment call, my judgment call is identical to yours, which is not to say that this is what happened. But this is sure what it looks like i must agree with that having said that i must tell you that i have met the highest officials

literally the highest officials in this space in the department of economic affairs and other departments and here are some observations number one these people are brilliant people so you know the person on the street feels that hey you know what the government doesn't understand crypto that's not been my experience they fully understand it as in they really get it so we never had to go and explain to them what a blockchain is and the like. So they knew it. Second, they do understand that they cannot take a draconian view and say, oh, ban everything.

Otherwise, they could have done that, right? As in they're the government of India, they could have done that. They patiently heard us on multiple occasions, spread over months. Having said that, I think the two forces that worked against us within government, one was the obvious lack of control. you know like the government can control every minute aspect of monetary systems and decentralization is opposed to that so the lack of control that would come in i think was problem number one and problem number two were all these people and i hope you share my irritation with

that who say oh blockchain is great but crypto is stupid you you heard that right pom yeah of course I mean, look, part of it is they haven't put work in. When I hear that, the people who are saying it, they haven't put the work in to understand the nuances and the reliance of, let's say, Bitcoin on a blockchain. Some of it is ignorance in terms of it's not even that they haven't put the work in. They don't want to put the work in. And then other pieces of it is they actually understand the nuance. It's just that's what's safe. right that that is what their peers or their customers um their employees uh their partners

that's what is kind of cool in that community right and so i think that there's a whole bunch of reasons why people arrive at kind of the blockchain not bitcoin um you know uh position but in my experience pretty much everybody who onboards into crypto uh and bitcoin they go through this uh evolution right it's oh this bitcoin thing is interesting but low probability that it's successful then it's uh blockchain not bitcoin right then it comes kind of full circle and eventually it is oh bitcoin is highly likely and this blockchain thing is also very real and there will be many applications of it but you have to go through that kind of learning evolution or journey uh to really appreciate the technology and the impact it can have i think absolutely and

you must also know uh it's it's related to what you said but this nuance gets missed a lot When I'm talking to a decision maker in any government or any regulator, and they are obviously, and rightly so, consulting a large number of stakeholders, there really is no owner of Bitcoin who says, I am the owner of Bitcoin or I am the originator of Bitcoin. And here is me talking about Bitcoin. But on the other hand, if you talk of the private blockchains, so the people who sell private blockchains, you know, as opposed to public blockchains are the information technology companies, the large software services companies, the tech consulting companies who stand there and say, you know what, we will help you set up tokenless blockchains. We will help you harness blockchain technology in a private, you know, closed user group

method where everybody pays for participating thereby of course largely take you know getting rid of all the benefits of blockchain but because they do come up with tokenless coinless centrally controlled blockchain architectures it allows regulators and decision makers to at least partially believe that oh you know what it seems like i could avoid the so-called evils of crypto but still harness the joys and fruits of blockchain uh by going the private blockchain method and that is probably where we are in the indian regulatory framework and soon it will become obvious right as in this is a force of nature absolutely and so what what do you think um the from a uh take your hat off as an entrepreneur and take off the hat of the

regulator and put the hat on of kind of the everyday citizen of india where would you say the level of interest is and awareness for Bitcoin, other cryptocurrencies or blockchain technology? Is it something that is pervasive or is it something that is still kind of early days and people have heard about it maybe, but they're still trying to figure out what it is? So in terms of Indians who have some direct personal exposure to crypto, by that I mean, they have a digital wallet. At least at one point of time, they owned a digital asset. Maybe they continue to hold that hold that the number is around 5 million which is on less than half a percent of india's population but there are a large number of people who understand at least

some parts of crypto but may not have taken a position so my estimate is that if you were to look at the urban semi-urban literate young young being defined as under 35 years of age the number of people who have heard and already have a view on Bitcoin would probably be close to 100%. Of course, I cherry picked, I gerrymandered myself a piece of, you know, the population. This probably accounts for 15%, maybe 20% of India's population. So I think people are very aware, but aware about what? Aware about some aspect of crypto. Regrettably, in most cases, what people tend to be aware of relates only to the movement of the price. and i know how misleading uh that can be because if you don't look closer it can be pretty crazy

as far as awareness level in government is concerned the government has like a million things to think about they think about 10 of that so the government requires uh let us say encouragement in the form of a large number of people getting interested in something before the government casts its eyes in that direction i think luckily so india has reached that point i must say that adoption of new paradigms of technology which lead to lack of control by the government is not something that came about only in blockchain i think social media did that so you know people could now bypass government influenced media and share news on social media twitter facebook what have you uh it happened in e-commerce where people you know it started

dissolving boundaries it happened in cloud computing where you know you could not seize hardware anymore because it could be absolutely anywhere it happened with mobile devices where people got empowered so there have been instances probably not as dramatic as the blockchain world where the government has had to take a decision a digital wallets could be an example which you know, to some extent, replace bank transactions. And I have found that in 100% of those cases, in absolutely every one of the cases, India has eventually adopted them. The government has come up with enabling and very progressive frameworks. So that is not my complaint. My complaint is that it's always very, very, very late. As in, I wish that, you know, some of these, that we accept

the future until it is thrust and don't not have to wait until it is thrust upon us as an accept and forecast be visionary in what you do as opposed to have reality thrust down your throat and so that is you know the way i look at it got it that uh that makes kind of sense um all right so let's talk about uh kind of your outlook moving forward right so as you guys are building this you're going to get um kind of this consolidation of exchanges down from hundreds to uh a few you know that that actually really matter over the long run are sustainable uh this model of kind of zero fees um with upsells and services around it uh and then obviously there will be kind of the continued regulatory uh evolution right in certain jurisdictions obviously uh india being a

huge focus uh for you guys and for many people around the world what comes next right kind of talk me through how you look out over the next 24 months um what you're excited about and where you think people should should be paying attention if you participated if you purchase something online in the mid 90s late 90s uh which means you were one of the early adopters of e-commerce you probably purchased on many websites other than amazon and ebay and etsy and a few others and because there were so many choices uh nobody could expand their product line as much as amazon has probably done today but the invisible hand of economics causes certain industries to start looking like you know the winner-take-all kind of industry as we are seeing in certain sectors

whether it's taxis whether it's e-commerce and like there are several other industries for pharmaceuticals airlines etc which tend to be more physical and non-digital in nature where this may not necessarily be an economic reality. Because crypto tends to be largely digital, if it were freed from the shackles of artificial regulatory boundaries, I think it would very soon gravitate towards a winner-take-all or a model which is very close to that. As in at least something similar to social media where there will be only three or four somewhat differentiated major platforms. There really is no need to have so many platforms because A, there is no geographic limitation it's not as if you know i'm opening a retail store which cannot you know transact with

people 20 kilometers down the line and certainly not 200 kilometers down the line and 2000 kilometers away customers are not going to visit me this is digital the delivery is online so there is no reason to have a geographical focus there is no differentiation in the token especially as the number of tokens that are transacted with any degree of seriousness actually decrease as opposed to increase. So if you buy one Bitcoin over Zepay as opposed to somebody else, you are getting the exact same Bitcoin. What would differentiate one player from the other would be differentiation around services built around the exchange. It would be probably a different level of trust that people have around how things are done. It would be probably certain local

flavors or promotions. So I can see five exchanges existing. I can see a dozen exchanges existing over time. I cannot see much more than that. And this too, I'm talking of the period for which centralized exchanges will remain popular. When decentralization starts becoming more real, it is real today, but I mean in terms of adoption and overcoming some of its limitations, I think that, I don't know, probably we may have still fewer exchanges. So I think this path is natural. If other people in the industry also accept this, because they will sooner or later, as people start shutting us up, there might be an opportunity

for exchanges to work collaboratively, start merging with each other, have stock swaps. I think that is an inevitability. At Zepay, I continue to remain very open to any such possibility. I don't see a need for all of us to have a similar customer base,

offer a similar customer experience, selling an almost identical product. So I think that M&A going forward is going to be the name of the game. My prediction is that we may go through 2019 without seeing some of those forces coming into play because if the crypto winter thaws, we'll once again be growing very rapidly.

But I think we are not going through another business cycle without going through a huge consolidation phase. Got it. That makes sense to me. Before I wrap up, I always hit rapid fire questions. What's the most important company in crypto other than Zedpay? Other than ZepPay today, it is Binance.

It used to be Coinbase. Why Binance? That does not sound like a rapid fire question. It sounds like an analytical question. Here's the thing. I'll tell you what I don't like about Binance. The reason I tell you what I don't like is frankly because I like most of the rest. So the shorter answer is, I think that Binance has made it difficult for some others such as us

who are highly compliant. As in, I think of Zepay as a highly compliant exchange and the fact that, you know, you pretty much get away with very low levels of KYC, if any, I think is what Binance has used in the past. Going forward, I don't think it will be able to use that as an advantage. Other than that, the way it has created customer experiences,

evangelized crypto, I think is quite creditable. i have forever been a fan of coinbase so i regret the fact that i did not say coinbase but i think that coinbase despite being in the world's most cutting-edge industry sometimes seems like they are not moving fast enough uh which sometimes can be a challenge available to the obvious market leader uh maybe they'll change as in they listed more tokens they have shown a lot of signs i think they'll change it could soon be coinbase again got it that makes sense uh if you could change or improve any one regulation which one would it be i would make it more clear don't change anything make it stricter but make it clear tell us what i should do that's fair um what's your

most controversial thought in crypto what do you believe that the highest majority of other people disagree with um okay so i'm going to say it maybe you'll say it's not too controversial but i'm i think that going into the distant future it will still remain bitcoin number one position oh i don't think it's controversial at all that's because you and i think alike talk to others xrp believers talk to the ripple believer guys they are like oh what are you talking about it's ripple all the way then of course somebody will come and say bch is the real bitcoin not to say ether oh smart contracts you know what you btc guys don't know what that is all about so so so

i don't know what proportion believes in what but i i don't think i'm a bitcoinist as some of my founders are but i am probably a maximalist nonetheless yeah what uh what's the most important book you've ever read so whole life the most important book i read was e smith the e myth what is that so actually i read this when i was still a student so you know it's made the most impact on my life e-myth stands for the entrepreneurship myth a book which tries to tell you that entrepreneurship is a myth it takes the negative approach to encourage people to be entrepreneurs and tells you about how entrepreneurs fail all the time and in telling you why entrepreneurs fail the obvious lessons you draw or how not to fail so i learned i read

this up in my late teens or early 20s made the maximum impact on me and i decided the only thing i ever wanted to be was an entrepreneur so that's the book that had the most impact on me if you want to know a more recent book it would be the douglas adams hitchhiker's guide trilogy which actually had four books if you really expected me to list a crypto book i'm sorry to disappoint no you're you're all good uh aliens believer non-believer think they're real three answers one yes believer two we are aliens ourselves to somebody else and three obviously they've got to be alien life carl sagan explains it in cosmos i love it i love it um all right you could ask me one question before we finish up what question

you got so pomp you and i you much more than i spend our days trying to explain people the obvious um the the converts are increasing every day the naysayers are their voice is getting less loud but it does get frustrating right as i'm probably speaking from my behalf but i assume it does for you also so what can we people who genuinely non-commercially you know philosophically want to promote crypto what else could we do yeah i think that the two key pieces are one uh get people to use it. So a lot of times when I'm talking with folks, what I will do is I will try as much as I can to send them some Bitcoin, get them to use something like XDAI, like the burner wallet, just anything I can do to get them to interact with the technology and

feel it and see it for themselves, I think is a really fast way to get them excited. And then the second thing is, while many people are pounding the table and talking about how this is revolutionary, I really focus on it's evolutionary, right? Like this is a natural progression of technology. All we are talking about is the advent of digitally native assets, digitally native accounting and digitally native contracts. And that is all laying the groundwork for automation. And I find that it's very few people in the world will argue that automation is not coming. Right. Many of them will argue that, of course, that's going to happen. So I think it's just get them to use the technology in some form or fashion, even if it's just kind of a demo or prototype.

And the second is just helping them understand in a more macro world, like how does this fit into other things? Right. How does this fit into the kind of technology that they use on a daily basis? And usually we can get people pretty excited and at least not negative towards Bitcoin, crypto and blockchain very quickly with that way. But obviously getting somebody going from, you know, a nonbeliever or detractor to a proponent, that's a pretty big switch. That takes time. But my biggest goal is when I meet somebody who is either unaware or not excited is just get them to at least be neutral to start. I think that's great. And if you will allow me, you know, I've always believed that as CEO of Zeppe, it's not my job to go ahead and plug Zeppe anywhere. It's more about education and people will then do the right thing. In the spirit of inviting people to use the asset, if you will allow me, and I would like to tell people that you could go to Zeppe.com today and actually do a lightning transaction. which means and we will not use money from you we will chip in the money you can actually make a payment and if i'm not mistaken one of the opportunities is to pay and get to play a game

of space invaders which is an old arcade game and those of us who felt that bitcoin was too much of mumbo jumbo and too much of something that only engineers would use would see how easy it is to pay money through the bitcoin network more specifically through the lightning network and use the asset class and it would be my honor privilege and great delight to have been the platform on which you did your first ever lightning payment so please check it out i love it i love it all right i appreciate it very much um this has been excellent i i really think people will find it uh fascinating to hear kind of you know what's been going on in india um and uh and how you guys have have navigated that and then your thoughts on uh on crypto exchanges and how that model will

evolve over time. So thank you. And we will have to do this again in the future. I tell you, I'm sure that shortly we'll have so many more things to talk about. Thanks, Pomp, for having me. This is a delight. For those of you that are curious about cryptocurrency, but you don't know where to begin, Stormplay is a free and fun way to start earning in exchange for your time. You can simply download, register, and discover micro tasks that meet your interest, and you're rewarded with Storm Bolts. These bolts can then be converted and withdrawn into your favorite cryptocurrency including storm token ethereum or bitcoin you can earn cryptocurrency

rewards by playing new games and trying out cool new products all you have to do is go to the app store and download storm play today hey everyone pop here if you like this episode of off the chain and want to help us take crypto to the top of the apple spotify and other podcast charts please do us a favor and rate review and subscribe to review simply go to the off the chain homepage scroll down until you see the five blank stars. Taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts. I appreciate you listening and see you next time on Off The Chain.