India is considering legislation to ban cryptocurrencies, following the step of China as the central bank aims to develop and promote its own digital currency.

In the bill called Cryptocurrency and Regulation of Official Digital Currency Bill, announced late Tuesday, parliament is pushing to ban private cryptocurrencies and create a framework to develop and promote a central bank digital currency (CBDC).

It will be put before the lower house in next week’s session, according to a bulletin of parliament’s upcoming business.

India, like China, has been critical about cryptocurrencies as they seek to protect traditional financial institutions from its growing impact. The two largest economies in Asia are now towing the same path after China declared all cryptocurrency transactions illegal in September.

The bill “seeks to prohibit all private cryptocurrencies in India,” but would allow “for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”

The bill would also “create a facilitative framework for [the] creation of the official digital currency to be issued by the Reserve Bank of India,” it said.

Another country that has taken a similar step is Nigeria, though not through parliamentary action. In February, the Nigerian central bank banned all regulated financial service providers from offering crypto-related services. The central bank has gone ahead to launch a digital currency called eNaira.

India set the pace as early as 2018. In April 2018, the Reserve Bank of India (the central bank) had banned banks and entities regulated by it from supporting crypto transactions. Though the decision was overturned by the Supreme Court in March this year, the government’s concern about the use of virtual currencies in India remains.

The RBI had said the use of private cryptocurrencies posed a threat to India’s macroeconomic and financial stability and it is deeply concerned.

“Cryptocurrencies are a serious concern to RBI from a macroeconomic and financial stability standpoint,” the central bank chief Shaktikanta Das said at an event earlier this month.

“The government is actively looking at the issue and will decide on it,” Das was quoted as saying by the Indian Express newspaper. “But as the central banker, we have serious concerns about it, and we have flagged it many times.”

In the same vein, Prime Minister Narendra Modi said cryptocurrencies need to be closely policed, adding that they pose a risk to young people and could “spoil our youth” if they end up “in the wrong hands.”

Since the Supreme Court’s February ruling, India’s crypto market has seen more than 600% growth amidst increase in global institutional adoption.

What could the bill mean for bitcoin?

Bitcoin plunged after China took a swipe on cryptocurrency miners. For months, the leading crypto coin along with altcoins witnessed massive selloffs that plummeted the crypto market, cutting its value by half. Eventually, the market shrugged off China’s impact, and bounced back to hit all-time highs.

China was a bigger crypto country than India, having the largest percent of the mining. Therefore, the impact of the Chinese ban on the crypto market was expected. However, bitcoin shrugging it off within a short period indicates that a possible Indian ban will have less effect on the cryptocurrency market.

Tuesday’s announcement did not affect the general price of bitcoin, though prices of major cryptocurrencies on domestic exchanges fell sharply overnight. Bitcoin went down by around 18.53 percent, Ethereum fell by 15.58 percent, and dollar-pegged Tether plunged by 18.29 percent, according to data from Indian crypto exchange CoinSwitch Kuber.

I respect traditional Venture Capital (VC)  firms but I hate their business models. How can you find a great startup, fund it and because you are required to return money to your limited partners (“the VC’s investors”), in years, you exit even before the company begins life?

Yes, you got in when the startup was worth $200m and it went public for $2 billion. You rejoice because within a 7-10 year span, you have made say 10x returns. But wait for just 10 more years, the same startup which IPO’d at $2 billion is now worth $30 billion. But you had since gone!

What would have been bad if the VC had held its positions without any constraint of time? That way, instead of capturing value within $2 billion within a decade, it opens itself for value capture within $30 billion  in the window of decades. And you allow LPs which desire to exit to go.

That is why I did not design Tekedia Capital as a typical VC firm. I did the math and discovered that more than 90% of VCs are leaving money on the table because of artificial constraints of time they created. They become operators at the center of the smiling curve instead of at the edges. For all the backers of Facebook or Tesla, the greatest winners are the investors who got in early when they went public. The VCs who exited within the first 10 years of this company life  left value on the table.

(Some funds are structured to have expiration dates, typically 7-10 years which the fund must close and return money to limited partners.)

By removing time, Tekedia Capital investors will capture not initial opportunities but also latter day opportunities in our companies. In a cambrian moment, restricting boundless opportunities by time does not seem right. Tekedia Capital will play at both the center and the edges. And we want to ring the bell in a public market, unrestricted by time.

This is my destination: in the future, and because we have no constraints of time, as our startups mature, we can stay the course and capture compounding value by taking Tekedia Capital public. That seems like a great business model even for a business that focuses on analyzing business models from startups.

Comment: Not an area I understand very well, but certainly one that I am keenly interested in. I do think it is a risk reward thing for VCs. Yes, they take the biggest risks in the life of a new business venture, but they tend to do so often with a sit on the board, and thus exercising reasonable control over how things are done. The key objective is always to hit the right traction and make the business look as good as it possibly can. After IPO, especially for overhyped (or over-pumped) companies with unrealistic valuations, what tends to happen? The statistics is that 60% of IPOs lose value, falling below their pre IPO valuation within the first 5 years. Calculating the expected loss for a VC based on these realities, I can guess, is the reason they jump out at IPO. A few firms do go on to achieve astronomical growth, but on a probability expectation basis, I think I do understand why VCs behave as they do

My response: Your data is possibly based before the innovation age. I do think there was an inflection point from 2016 as cloud computing, mobile internet and software converged. Adjusting the impact of covid-19, most tech-firms have outperformed in the public market over that 5-year window. I used that data as I made the decision to setup my firm.

What happened in 1980, 2000 , etc could have made sense then, but now, I do think the innovation age offers new opportunities with new business models. I am bullish on the promises of this cambrian moment and we are just at the early phase of it.

There is only one movement: upward!

Join me to congratulate Insurpass for its huge partnership with AXA Mansard on health insurance in Nigeria. Insurpass is Nigeria’s first API-based insurtech startup and the largest in the nation. Tekedia Capital was its first investor and we’re truly proud of what the team has done so far. I told the team: “our expectation is that Insurpass would become the Paystack and Flutterwave of insurance in Africa”. 

Yes in America, most hedge funds control reinsurance companies and most holding companies have insurance which provides cheap capital to fund critical projects (hello Warren Buffet and GEICO). Nigeria and Africa must  experience their  moments by using insurance to unlock new vistas of growth.

Oh yes,  what the new generational banks did in the 1990s in Africa, making banking cool will happen as insurtech startups like Insurpass get to work. Besides insurance, Insurpass offers API for the pension sector.

Insurpass’s BimaCred is engineered to simplify health insurance claim management, connecting pharmacies, insurers and logistics together. We’re bullish that tech will change the insurance sector ecosystem as we work to improve the end-to-end service delivery at scale.

At Tekedia Capital, our goal is to discover new winners early.

== press release ==

Insurpass, an insurance technology company has partnered with AXA Mansard, a leading player in the insurance and asset management sector to provide access to affordable insurance coverage for emerging customers in Nigeria. 

The partnership will leverage Insurpass’ Open Insurance API to provide easy access to AXA’s health insurance products such as Malaria-care, Malaria-care plus, Easy Care, and so on.  AXA’s Malaria-care provides quality malaria test and treatment to customers at various accredited partner pharmacies nationwide. Malaria-care plus provides cashback on customers’ hospital expenses when placed on admission for 2 or more nights and pays life insurance benefit to the customer’s beneficiary in an event of a customer’s death. Easy Care provides comprehensive health coverage and gives customers access to over 1000 hospitals nationwide. 

Insurpass, in its drive, to deepen insurance penetration, increase financial inclusion and break the barrier to accessing insurance coverage in Nigeria through its plug-and-play API infrastructure and embedded insurance model will enable other service providers ranging from Banks, Health-techs, Edu-techs, and various point-of-sale agents to enroll customers for this health insurance scheme. The company also promises coverage to the base-of-the-pyramid consumers who live in rural areas and do not have access to smartphones or internet service, as it will enable them to access healthcare insurance via thousands of point-of-sales agents who already carry out mini-financial activities around their neighborhoods.

Speaking about the partnership with AXA Mansard, Gloria Agboifoh, Head of Partnership and Business Development at Insurpass, stated that “Insurpass at its core is committed to breaking the barrier to inclusive insurance in Nigeria and bringing innovative and affordable insurance closer to the very people that needs it the most and this partnership goes a long way in bringing the company closer to its goal of democratizing access to insurance coverage starting with health insurance”. 

In the same vein, Mr. Alfred Egbai, Head, Emerging Customers and Digital Partnerships Group at AXA Mansard, stated that “our aim is to create innovative products that cater for the needs of our customers. We will therefore continue to strive to ensure that these products are easily accessible, this is why we have partnered with Insurpass to achieve this objective”. 

Insurpass, provides an API-driven insurance infrastructure-as-a-service solution that enables companies across various sectors to embed insurance products and back-end insurance components into any web, mobile app, or USSD channel through its Open Insurance API. 

AXA Mansard is registered as a composite company with the National Insurance Commission of Nigeria (NAICOM). The Company offers life and non-life insurance products and services to individuals and institutions across Nigeria whilst also offering asset/investment management services and health insurance solutions through its two subsidiaries – AXA Mansard Investments Limited and AXA Mansard Health Limited respectively. The parent company was listed on the Nigeria Stock Exchange in November 2009.

 Customers can also access affordable insurance products on their devices when they log on to BimaCred (www.bimacred.com) an online platform powered by Insurpass.