The Great Indian Blockchain Migration has begun

Anand Murali May 8, 2018

What do you do when all those you interact with in your business are suddenly made out of your bounds? You search desperately for a place where transactions with your ecosystem are permitted.

That is precisely what actors in India’s blockchain ecosystem – developers, services providers, and other companies – are doing by moving bag and baggage to crypto-friendly destinations or at least seriously considering the option. The migration has been triggered by various moves of the Indian government to ring-fence all things cryptocurrency in the country as a result of which fledgling blockchain players here are looking for more friendly places.

Some even compare it to the brain drain in the dotcom boom that lead to a virtual exodus of topnotch tech professionals to countries with better opportunities. “We are having talented people and companies from the blockchain space move out of India. There are enough countries out there who realise the importance and want to take a lead in the blockchain ecosystem,” says Joel John, an analyst at UK-based Outlier Ventures.

This comes on top of a trend where startups and companies from India anyway find jurisdictions such as Singapore and Ireland attractive for tax, startup funding, and other reasons.

“Companies moving abroad is not a new trend but the regulatory complexities faced by blockchain companies have accelerated it,” says John. “They can easily fly down to a Malta, Singapore or a Cayman Island, set up the company and start working on their product. You rather lead a technology wave than play catch up.”

The product, he added, may still be developed in India even if the company is registered abroad.

The path for ICO projects

There are a few blockchain destinations that are attracting the Indians – each with its own pluses and minuses. Singapore, Estonia, the UK, Switzerland, and Japan are some names that come up in blockchain communities but among them, Estonia seems to be the favourite thanks to the crypto- and tech-friendly regulatory environment there and the ease of doing business.

Ask Abhinav Arora, chief marketing officer at Enkidu, a decentralised collaboration platform being built in Bengaluru. Its parent company Avalon Labs is a Singapore-registered entity.

“We had decided to go the ICO way and for that, the current Indian regulatory setup makes it difficult,” says Arora. Enkidu is looking to register itself in Estonia. “We also thought of Japan but that did not make financial sense to us because of the (taxation) cost involved in liquidating our Ether holdings. We even briefly considered Cayman as an option but Estonia was best suited for our projects especially with the ICO plan.”

ICO, short for initial coin offer, can be thought of as an IPO with minimal regulation and frictionless crowdfunding. A company doing an ICO usually raises money by selling its crypto tokens in exchange for cryptocurrency: BTC or ETH in most cases. But unlike an IPO, an ICO may not entitle the holder to shares or a stake in the issuing company. Instead, the value of the token issued during the ICO increases based on how well the company is doing.

Abhinav Arora, chief marketing officer at Enkidu
Abhinav Arora, chief marketing officer at Enkidu

In the recently concluded pre-sale of its ICO, Enkidu raised 1,311 ETH and the company is currently in the process of deciding on its ICO dates.

“The money from the ICO is for us to fund the development of our product but how do you fund product development when we cannot liquidate the Ether (in India) we raised through the ICO. That was the problem we faced in India,” says Arora.

Estonia top

Estonia launched its e-residency programme in December 2014 making it easy to register a company. Its representatives have been holding sessions in India to attract entrepreneurs there with a goal of 200 registered Indian startups.

In the rush to Estonia are blockchain companies from India. One among them is Indium, an Ethereum-compatible blockchain network with a focus on utility apps and public goods, founded by Nilesh Trivedi, a blockchain developer from Bengaluru.

“Crypto and blockchain are only one of the reasons for registering in Estonia. Being registered there will also allow me to offer other services and conduct business in the EU. Also the tax regime there is good,” says Trivedi, who is completing his e-residency process. “I would also ideally like to diversify from India given the way things are moving here in regard to cryptocurrency and the blockchain space. It’s too uncertain,” he says.

What also attracted him, Trivedi says, was that travel to Estonia to get his company registered was optional and the taxation regime was favourable. “To apply for e-residency, I had to give them a scanned copy of my passport, photograph, and very basic details. Now, one month later, my ID has arrived at the embassy,” he says.

While collecting the ID, a biometric verification will be done. There are service providers to help set up a company, open a bank account, and even keep books. The residency “will just cost me 100 Euros for three years and I can renew it again after that,” says Trivedi.


Visuals: Rajesh Subramanian

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