Ajeet Khurana, CEO of Zebpay: India's Clampdown on Cryptocurrency

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 These Bolts can then be converted and withdrawn into your favorite cryptocurrency, including Storm Token, Ethereum (ETH) and Bitcoin (BTC.).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

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Anthony Pompliano?

  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 discuss 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 microtasks

• 0:43Anthony Pompliano?

  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 These bolts can then be converted and withdrawn into your favorite cryptocurrency, including Storm Token, Ethereum, and Bitcoin.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.

• 1:27Speaker 01

  Bang, bang. Alright guys, I am here with Ajit. Dude, thank you so much for doing this. I really appreciate it.

• 1:35Speaker 02

  It's absolutely my pleasure. Thanks for having me here.

• 1:39Speaker 01

  Absolutely. Alright, so let's go, let's go through your background, and then we can talk about, you know, what you guys are doing at Zebpay, and kind of your future thoughts on crypto. But let's start with background first.

• 1:52Speaker 02

  So I 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 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 Zeppe shortly thereafter and started sharing my thoughts

• 2:33Speaker 02

  with them. They were India's largest exchange at that point of time, cryptocurrency exchange, primarily fiat to crypto, doing 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.

• 3:12Speaker 01

  Got it. And so before you you did that though, where you went to what UT Austin, right? And and then moved back to Singapore?

• 3:21Speaker 02

  No. So I've been in Singapore only for a couple of months. I did my engineering, an undergraduate degree in engineering from India. I did my MBA from the University of Texas at Austin. 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 thirty, 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

• 4:02Speaker 02

  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 two thousand eight sank my business and slowly sank my business. Two thousand ten to two thousand fourteen, I was a full-time angel investor, also an evangelist for the startup space, helping startups etcetera. 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. Zeppe was India only based when I became the India CEO, ran into regulatory hurdles

• 4:45Speaker 02

  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 two thousand eighteen, we tried to become a global player, incorporated in Malta, had a holding company in Singapore, now I am resident in Singapore.

• 5:15Speaker 01

  Got it, very cool. And do you remember the first time that you came across Bitcoin or crypto?

• 5:21Speaker 02

  The first time I came across it seriously was in September sixteen, but the first time I heard of it, I am embarrassed to say, was as late as two thousand fourteen 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.

• 5:56Speaker 01

  Very cool. And so talk to me a little bit about kind of how you viewed 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?

• 6:17Speaker 02

  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. I mean, 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,

• 7:00Speaker 02

  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, you know, crypto continued to wow in 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

• 7:41Speaker 02

  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. But I want, I definitely want to align with the future. And the obviousness of the power of this decentralization, you know, hit me. And that's what brings me here today.

• 8:22Speaker 01

  For sure. And then, and then why, why exchanges? Why focus on kind of 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, to focus?

• 8:37Speaker 02

  So what happens for a lot of us in our careers is that we end. It's, 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, right? You know, there were four exchanges of any consequence in India. And because of huge capital control norms, India was an isolated market. Like, you know, Indians could only trade on Indian markets, which would explain why the prices used to usually be five to 15% 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.

• 9:18Speaker 02

  Secondly, 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 helped 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.

• 10:03Speaker 02

  However, I do agree. With the significance of your question in that why exchange? I think that some form of swap, whether you know it's a DEX or whether it's a centralized exchange like Zebpay 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 Zebpay's future as being an exchange only future. But this is where we are today.

• 10:44Speaker 01

  Got it. And so a- 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? Like where do you see that that evol- that evolution coming into play?

• 11:04Speaker 02

  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, you know, ahead of the pack. The good thing is that these are the guys who show us direction. We like to think of Zebpay, you know, headed in that direction, not quite there yet. The problem with these guys is 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.

• 11:45Speaker 02

  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 lightning. My position is that as long as survival and sustainability.

• 12:13Speaker 02

  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.

• 12:22Speaker 02

  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 at a model level, I think about things. If you want to discuss anything specific within this, happy to do so.

• 12:36Speaker 01

  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 I think that there's a lot of people who hear about lightning. They have tried to look at it. Let's, 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?

• 13:00Speaker 02

  So let me tell you at a, at a framework level, and then we can discuss lightning specific. When I got into crypto, the number of people who were crypto naysayers 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, this, the bandwidth of the underlying blockchain was indeed a concern.

• 13:43Speaker 02

  So the fact that lightning through, you know, 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 you know, the, the, the transfer fee or the withdrawal fee. Went from fixed, which was probably hundred sat to variable. So what I like about all of this, ending with or coming up to a lightning is that this shows

• 14:29Speaker 02

  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 guess so much, but it does have interesting opportunities. So, so that is, that is the way I am viewing lightning as a tribute to how well or how clearly Bitcoin is poised to capture the future.

• 15:07Speaker 01

  Got it. And, 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, right? It's, it's just growing so incredibly fast in, you know, what's now a little bit over a year. And it, 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, right? 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.

• 15:50Speaker 01

  It just feels like that there's an added component in crypto around community and adoption than just, hey, the technology works.

• 15:57Speaker 02

  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, did not turn out to be the fish that would climb a trees. But if I were to look at crypto as a technology and I talk, so I did my computer engineering way back in the year nineteen ninety one. So I, obviously a lot of colleagues who are in the computer science space and IT space, 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 specialized and 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, et cetera.

• 16:41Speaker 02

  And what a lot of those people were missing out on was that if you were to Think of blockchain only 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

• 17:26Speaker 02

  in multi-sig 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 what was called a virtual. You know, the most common word then was portal, which continues to be a word used today. But virtual was vertical, local kind of websites. And we tried to sell stuff online in India. And we found that 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.

• 18:10Speaker 02

  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, you know, and about the programmability and the smartness of how you can transact that are so compelling that, 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.

• 18:53Speaker 01

  Got it. And so as part of that social dimension and something we 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 Zebpay, you know, my understanding is kind of the zero fee model. Right. So we see this with very few platforms in the non-crypto world, right? Things like Robin Hood obviously kind of made this 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. You know, how you're making that sustainable and if you guys will continue to do it in the future.

• 19:36Speaker 02

  Okay, so, you know, let me get to the economics of how we can be a reasonable business despite zero fees. 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 the organization which will win will necessarily, by necessarily, I mean in hundred percent 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. But other than that, you know,

• 20:21Speaker 02

  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, 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, transacts so many times that he generates $10,000 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.

• 21:05Speaker 02

  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, decentralizing of power, authority, action, responsibility, which is goes fundamentally to crypto. 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 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, you know, at a pace which is great but is not profitable.

• 21:51Speaker 02

  If it were possible to do that with zero fees, then that would be the greatest model, right? Yep. We thought about that. So 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?

• 22:07Speaker 02

  Pretty much like the example of Robinhood you gave. So if you go to Robinhood 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 fifty dollars or hundred dollars. And then when you showed up there, they say, yeah, you know, in addition to those hundred dollars, 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 hundred dollars you gave me.

• 22:53Speaker 02

  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 Zeppe's experience in India, we saw that the transaction fee, which is the commission that the exchange charges on the orders executed on its order book, accounted for about eighty 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

• 23:36Speaker 02

  know, we 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 twenty percent. So I said, you know what, if we can keep that twenty percent constant, forsake the eighty percent, I just need to have five times more the volume of business, so my twenty percent into five still gives me the same revenue as the hundred percent. 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, you know, so that I'm completely transparent, tell you that we

• 24:21Speaker 02

  also have an O T C 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, you know, positions, but there can definitely be a certain amount of revenue that comes from the O T C desk slash O T C 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 twenty-four by

• 25:05Speaker 02

  seven 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.

• 25:24Speaker 02

  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, 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 zero point one not being exception to the rule, zero point two probably is what most exchanges charge. I think we are already at zero, it's just people's unwillingness to accept that zero is the new normal.

• 26:06Speaker 01

  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 jurisdictions or geographies where this is going to work? Or does this actually become the standard across the globe?

• 26:18Speaker 02

  I think this is where crypto will be different than, let's say, a zero fee, you know, stockbroker. 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 in it's a top ten exchange in the world, and we are charging zero fees. How does that make the remaining nine in the top ten feel? Or how does that make the remaining forty nine in the top fifty feel? Right? So people will notice that here is an exchange which created a compelling argument. Maybe this is the model we should look at. So 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.

• 27:01Speaker 02

  The reason I think that in the stock market world, things were a little different than in the crypto world is, A, 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. There is people who will try to club them in forms of ETFs, mutual funds, etc. So I think that the opportunity, the empowerment that the person in 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 the five to ten percent who have aligned themselves with crypto philosophically,

• 27:45Speaker 02

  I think are very empowered. So this is where I think everybody's will eventually head.

• 27:50Speaker 01

  Got it. And so as part of that, right, let's say if you take Zebpay, at one point, and 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 this 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 it's not just like an overnight reaction to to your guys' model.

• 28:22Speaker 02

  Okay, so I'll just quickly throw three facts at you because there's a chance of miscommunication. Number one, we are no longer operational in India.

• 28:30Speaker 01

  Okay.

• 28:30Speaker 02

  We introduced zero fee several months later, probably as much as about seven to eight months after we had discontinued Indian operations. So in India, Zebpay doesn't operate anymore. There's no exchange who's licensed to use the name Zebpay and all of that. So I cannot comment on, you know, what how India would react if and when Zebpay restarts there and has a zero fee model. That that remains to be seen. As far as, so if that is the case, what does your question become?

• 28:59Speaker 01

  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 what's transpired in the last, you know, kind of year, year and a half when it comes to crypto and regulation in India.

• 29:16Speaker 02

  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, the first reaction of the Indian regulator was to pretend that crypto doesn't exist. Right? As in just look the other way, that these children are playing something, they'll go away. And we refused 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, 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

• 30:00Speaker 02

  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, etcetera, start looking very closely and they can then distinguish that there are these good players and there are the not good players. So that ZEPPE clearly not just became a good player but a dominant good player. Then 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.

• 30:41Speaker 02

  So what started happening is that bankers started shutting accounts, not just of crypto exchanges, but bizarrely even of individuals who are 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.

• 31:25Speaker 02

  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.

• 32:08Speaker 02

  But let us just try to not dig deep on 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? Uh, 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. ZP 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,

• 32:53Speaker 02

  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 ninety-eight plus percent, a crypto to fiat market. And then the only remaining opportunity for us, uh, which I believe all players other than ZP took, uh, took, you know, took, took to was to become a peer-to-peer trading platform. Now, the problem is that in the kind of regulatory slash law enforcement, um, system that we work in India, I was worried that while I would continue to make my fee, in fact,

• 33:38Speaker 02

  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.

• 34:20Speaker 02

  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 two 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 eighteen. I wrote a very small blog post and announced that there is no reasonable way.

• 35:05Speaker 02

  In which the crypto exchange business can be transacted in India. Uh, of course, our customer 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.

• 35:43Speaker 02

  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.

• 36:13Speaker 01

  Yeah, and it feels like to me the government's approach in India, and I may be wrong on this, you correct me if I'm wrong, but it feels like the government's approach has been, it's going to be hard to regulate the crypto exchanges, just given the way that the technology works, right, 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 legally compliant and regulatory compliant, and you say to them, you are going to be out of compliance.

• 36:58Speaker 01

  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 companies. Does that sound right to you?

• 37:16Speaker 02

  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?

• 38:01Speaker 02

  As in, they are 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 heard that, right, Pom?

• 38:43Speaker 01

  Yeah, of course. And it's, I mean, look, part of it is, you know, they haven't put work in. When I hear that, right, 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, right? 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 is what their peers or their customers, their employees, 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,

• 39:24Speaker 01

  not Bitcoin, you know, position. But in my experience, pretty much everybody who onboards into crypto and Bitcoin, they go through this evolution, right? It's, oh, this Bitcoin thing is interesting, but low probability that it's successful. Then it's 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 to really appreciate the technology and the impact it can have, I think.

• 40:04Speaker 02

  Absolutely. And you must also know, 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?

• 40:46Speaker 02

  We will help you set up tokenless blockchains. We will help you harness blockchain technology in a private. You know, close 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. By going the private blockchain method. And that is probably where we are in the Indian regulatory framework.

• 41:31Speaker 02

  And soon it will become obvious, right? As in, this is a force of nature.

• 41:36Speaker 01

  Absolutely. And so what, what do you think? The, from a, 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 technologies? 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?

• 42:03Speaker 02

  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 five million, which is 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 thirty-five years of age. The number of people who have heard and already have a view on Bitcoin would probably be close to hundred percent.

• 42:46Speaker 02

  Of course, I cherry picked, I gerrymandered myself a piece of, you know, the population. This probably accounts for fifteen percent, maybe twenty percent 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 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, let us say encouragement in the form of

• 43:32Speaker 02

  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. 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 that people got empowered.

• 44:14Speaker 02

  So there have been instances probably not as dramatic as the blockchain world where the government has had to take a decision. A digital wallet 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 do not have to wait until it is thrust upon us.

• 44:54Speaker 02

  As in, 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.

• 45:05Speaker 01

  Got it. That, that makes kind of sense. All right, so let's talk about kind of your outlook moving forward, right? So as you guys are building this, you're going to get kind of this consolidation of exchanges down from hundreds to a few, you know, that, that actually really matter over the long run or sustainable. This model of kind of zero fees with upsells and services around it. And then obviously there will be kind of the continued regulatory evolution, right? In, in certain jurisdictions, obviously, India being a huge focus 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. What you're excited about and where you think people should, should be paying attention?

• 45:47Speaker 02

  If you participated, if you purchased something online in the mid nineties, late nineties, 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, 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, pharmaceuticals, airlines, etc., which tend to be more

• 46:33Speaker 02

  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 2,000 kilometers

• 47:15Speaker 02

  away customers are not going to visit me. If 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 Z Pay 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.

• 47:58Speaker 02

  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 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.

• 48:40Speaker 02

  At Zebpay, 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 and 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.

• 49:16Speaker 01

  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 Zebpay?

• 49:25Speaker 02

  Other than Zebpay today, it is Binance, it used to be Coinbase.

• 49:29Speaker 01

  Why Binance?

• 49:31Speaker 02

  That does not sound like a rapid fire question, it sounds like an analytical question.

• 49:38Speaker 02

  Well, here's the thing, I like what I don't like about Binance. Because 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, you know, Binance has made it difficult for some others such as us. Who are highly compliant, as in I think of Zeppe 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

• 50:21Speaker 02

  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, which sometimes can be a challenge available to the obvious market leader. 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.

• 50:46Speaker 01

  Got it, that makes sense. If you could change or improve any one regulation, which one would it be?

• 50:52Speaker 02

  I would make it more clear. Don't change anything, make it stricter, but make it clear. Tell us what I should do.

• 51:01Speaker 01

  That's fair. What's your most controversial thought in crypto? What do you believe that the highest majority of other people disagree with?

• 51:09Speaker 02

  Okay, so I'm gonna 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 in number one position.

• 51:21Speaker 01

  Oh, I don't say it's controversial at all.

• 51:24Speaker 02

  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.

• 51:51Speaker 01

  Got it. What, uh, what's the most important book you've ever read?

• 51:56Speaker 02

  So whole life, the most important book I read was E Smith, the E myth.

• 52:03Speaker 01

  What is that?

• 52:05Speaker 02

  E, 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 a 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 on how not to fail. So I learned, I read this up in my late teens or early twenties, 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.

• 52:49Speaker 01

  No, you're, you're, you're all good. Aliens, believer, non-believer, think they're real?

• 52:57Speaker 02

  Three answers. One, yes, believer. Two, we are aliens ourselves to somebody else. And three, obviously there've got to be alien life. Carl Sagan explains it in Cosmos.

• 53:09Speaker 01

  I love it. I love it. All right. You could ask me one question before we finish up. What question you got?

• 53:16Speaker 02

  So Pamp, you and I, you much more than I, spend our days trying to explain people the obvious. The, the converts are increasing every day. The naysayers are, their voices 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?

• 53:48Speaker 01

  Yeah, I, I think that the two key pieces are one, get people to use it. So a lot of times when I'm talking with folks, what I will do is I, I will

• 54:00Speaker 01

  try as much as I can to

• 54:04Speaker 01

  Send them some Bitcoin, get them to use something like X-Dye, you know, like the burner wallets, 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?

• 54:49Speaker 01

  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 then 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 non-believer detractor to a proponent, that's a pretty big switch, and that takes time. But my biggest goal is when I meet somebody who is either unaware or not excited,

• 55:35Speaker 01

  is just get them to at least be neutral to start.

• 55:40Speaker 02

  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, in the, you know, 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

• 56:25Speaker 02

  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 take it out.

• 56:44Speaker 01

  I love it. I love it. All right. I appreciate it very much. This has been excellent. I really think people will find it fascinating to hear kind of what's been going on in India and how you guys have navigated that. And then your thoughts 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.

• 57:07Speaker 02

  I tell you, I'm sure that shortly we'll have so many more things to talk about. Thanks, Pop, for having me. This is a delight.

• 57:14Anthony Pompliano?

  For those of you that are curious about cryptocurrency, but you don't know where to begin, Storm Play is a free and fun way to start earning in exchange for your time. You can simply download, register, and discover microtasks 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 liked 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,

• 57:58Anthony Pompliano?

  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.