In the second part of our interview with Zebpay CEO Ajeet Khurana, we discuss the Indian crypto market, exchanges and customer surveillance.
“We Don’t Mind Stringent, Even Draconian Compliance”
When asked about where Zebpay’s operations are based (geographically), Khurana revealed that as far as the exchange’s long-term operations are concerned, “we are heading towards a highly compliant space, as opposed to finding a territory where you can dodge compliance. And, we do not mind stringent, even draconian compliance, but we want to clarity as in we’re saying don’t make it easy for me. Just tell me what you want. And, that is too much to ask for, for most regulators around the world at present. Having said that, you should know that Zebpay is not the name of any company. It’s a brand name.”He further noted: “There’s no company called ‘Coke.’ It might be, you know, ‘Mexico Beverages Private, Ltd’ in Mexico and something else somewhere else. So, the company that ran the exchange under the brand name, Zebpay has not moved anywhere. That’s not the company that moved. We have a parent company that’s a holding company in Singapore, which has granted a license to a company in India to run the exchange. Now, that same company has set up a subsidiary in Malta. So, it’s an oversimplification to say that Zebpay moved from India to Malta. That’s not the case. That Zebpay which was in India, is still very much in India. I used to be the CEO of that, but I no longer am. I am now CEO of the global holding company.”Going on to acknowledge: “I know this sounds too technical, but in regulation terms, this is very important because you can’t just move a company from one territory to another. As far as the logic of the entire thing, while we do think we are victims of … unclear [regulations,] but at the same time, if I were to try to be completely fair, I can see why regulators would have such a tough time trying to regulate this. So, the very first question is that, does [something x] need to be regulated? Then, by who and under what category? Right there, [that’s] what’s [confusing] people...Countries where these questions have been answered such as US, Switzerland, Malta … probably Singapore to some extent. [So,] now we can move forward to [address other questions] like what are [exactly] the regulations? But most countries in the world never made up their minds about the [most basic] regulatory [questions.]”Elaborating further on the lack of regulatory clarity: “What tends to happen is that a lot of these countries will not even ban Bitcoin but if they did, that would be there first act of regulation. What happened in India, unlike what I read in global media, there had been no government action which had adversely affected the [local] crypto industry. But one fine day, the central bank announced in [early] April that they will not allow their licensed entities to support this business. Now, in India, that means everything is gone. Banks, payment gateways, digital wallets, credit cards, debit cards, everything. Paypal is also regulated by that in India. So, any payment processing method, any really, we wrecked our brains. So now, basically what do you do?”
Crypto-To-Crypto Market “Did Not Take Off In India”
Sharing with CryptoGlobe that the crypto-to-crypto market did not take off in India, Khurana said: “You have a crypto-to-crypto market, right? So, we experimented with that, but that really did not take off in India. And some people tried to [launch] a LocalBitcoins equivalent in India. Given the money laundering concerns, we were not very happy. Although we were the market leader, usually having two-thirds or three-fourths of the volume in India. We said that our customers will land into a lot of trouble - even if one thing went wrong in the peer-to-peer (P2P) model so we refused to do that.”Going on to reveal what other exchanges did at the time of the RBI ban, Khurana stated: “I think most other exchanges went into versions like LocalBitcoins, or otherwise. And while we were happy working with regulators, talking advocacy, choosing law firms, fighting cases even as far as the Supreme Court...we did not want to put our customers into a situation that they would now have to do that.”He added: “And we felt that if we come up with ethically suspicious method of fiat to crypto, it would not be right for our customers. So imagine a company or brand that has operated in only one territory, has been eminently successful … has only one source of revenue and nothing else on the pipeline decides to shut that and how difficult that would be. And, our customers hated us for that. Naturally, they would, right? And, I would too. While my board congratulated me for being the most courageous CEOs around for having made that decision, it didn’t feel good at all - as it was one of the worst decisions I’ve had to make.”
Zebpay’s Current Situation, After RBI’s Ban
Elaborating on Zebpay’s current situation, having gone through the long months of regulatory uncertainty and the reserve bank of India’s (RBI) (and Supreme Court imposed) ban on cryptocurrencies, Khurana revealed that “regulations have, on the whole, been moving in a more friendly direction” in India.He added: “As far as India is concerned, the actual order that challenges the central bankers does not impact regulations because there aren’t any now seems like it might close soon. And we will then know what came out of it because if the Supreme Court says okay [there’s] no banking support...in fact, the Supreme Court has also said that, you know the industry is effectively killed. But, the Supreme Court says that the government has to decide on the legality or illegality.”He further noted: “India would not want to be one of those territories … like if you were to make a list, draw out a world map of places which are red and green … and green being okay you can do it in one form or the other and red being not …. India would probably see it self economically in the green group.”
How Zebpay CEO Got Into Crypto
Responding to a question about how he got into crypto, Khurana told CryptoGlobe: “First of all, I’ve been an entrepreneur all my life. I’m approximately 49 years old. I will be that in 10 days exactly. And the [total amount of time I’ve been an employee] is now a little under three years. So I’ve been a serial entrepreneur, investor, and a full-time angel investor for four years. So, I’ve always been in spaces which are new and innovative.”He further stated: “In addition, I have always been looking for investment opportunities that are not [so typical] … going way back into my early 20s, it would be like trying to see if I could invest into comic books, stamps, coins, wines, art - instead of the usual mutual funds … I keep looking for opportunities. Recently, I found a way to invest into SpaceX … and in HackerNoon and in Google. So, I’ve always looked for newer places of economic activity and in 2014-15, for the first time I saw this thing called Bitcoin .... very, very late into the game although today it seems like I was very early and I saw it and I thought what is it, so I guess it’s some form of money. And, I said okay so whatever you can find out in just one minute after [being introduced to] Bitcoin sounds ridiculous. As someone [looking in] from the conventional finance world, its money that nobody issues, no government recognizes it, but we just say it’s money”
Concept Of Bitcoin Sounded “Very Bizarre” At First
He added: “It sounded very bizarre, so I brushed it aside. But because I am an investor who’s always [looking for] innovative economic models, [Bitcoin] would keep attracting me again and again - as it was something you know, it exists today … it won’t exist tomorrow. But Bitcoin refused to vaporize, so around [2015], I started doing the Coursera course [on Bitcoin and cryptocurrencies.] I started studying and I did about 500 hours of studies over two calendar years.”He further noted: “And, around September 2016, I said it’s time to put in a little money. So, I put in 1000 [Indian] Rupees, which is something like less than $15. And I said [to myself,] I am going to try and sell it and try to get my money back and see if that actually happens. And it happened. And though I did it over a 24-hour period, the price of Bitcoin (BTC) had moved 7% in my favor. [At that point,] the greed factor kicks in.”Going on to share how began to substantially invest in Bitcoin, Khurana said: “[After that,] in a couple of months, I had invested a lot of money into Bitcoin all the way up to April 2017. [At that] point, the Bitcoin price surged to such a high [level] … almost $1100 … and then I thought there’s no way I can buy it at such a high [price.] And after that, although I’ve purchased it twice, those were smaller amounts and my average purchase price has [remained] under $1,000. But now that I was committed to it, I started studying it more, [in order] to understand the technology behind it.”While sharing his academic background with CryptoGlobe and how it indirectly motivated him to do what he’s doing now, Khurana noted: “My undergraduate degree is in Computer Engineering and I’ve always been attracted to very scalable, innovative, technological solutions. I’ve always been [that] guy who first had email, first had internet access, [first had] the Amazon Web Services (AWS) account for cloud computing, first one to have a mobile device … so being an early adopter by nature, I started getting calls to media interviews and people saying what’s this Bitcoin thing anyway? [And,] I was getting beaten up in TV studios by people telling me I was really stupid.”He continued: “That’s when one of the founders of Zebpay, who I’d known as a founder of a previous company, came to me and said that they want to organize the industry and find the CEO of an industry body … and he came to me for advice. And, frankly in my heart I was thinking, I’m not the best person for it, but it somehow was not [the way he saw it.] So, he went about it, they hired one person...then, later they said, why don’t you do it...you know, sending all the subliminal messages.”
How Zebpay CEO Joined the Blockchain And Cryptocurrency Committee Of India
Explaining how he joined one of India’s leading Blockchain associations, Khurana remarked: “So, in January 2017, I joined as head of the BACC, which is the Blockchain and Cryptocurrency Committee. [As the leader of this] organization, I started talking to the [representatives] of the government and they were also very keen to talk to us. And, they were glad there’s one person they can talk to, as opposed to anybody who claims to represent the industry. Shortly thereafter, because I would refuse to work for the association office...I would want to work from the industry players office.”
He added; “[Because of this type of situation,] I would invariably find myself in the Zebpay office, because they weren’t the largest, [but] they were the most influential. They were always the ones doing the best things first. So, it was natural. They said you know forget the association, why don’t you just join us as CEO. So, in March 2017, I joined them as CEO. Just imagine, on March 13th, I joined them as CEO and on April 5th, we received the circular from the RBI saying ‘you can’t do this anymore.’”
“The Most Exciting Industry Got More Interesting”
Reflecting back on this experience, Khurana said: “And at that point, the industry that was the most exciting industry got even more exciting.”
When questioned about what’s next on the roadmap for Zebpay, Khurana stated: “Barring artificial hurdles that a company might face, where it says you need to only be a company in this country to serve this country … or barring certain niche models such as only listing tokens of a certain type … I do not see the need for so many exchanges in the world. As in you could differentiate them as in crypto-to-crypto and crypto-to-fiat. You could differentiate them as compliant and not compliant.”
In The Long-Term, We Might Have No More Than A Dozen Exchanges
He further noted: “[However,] there’s really not too much of a distinction. And, it fundamentally arises from the fact that the end product you buy from them is absolutely identical. So if you purchase Bitcoin from exchange A versus exchange B … you get the exact same Bitcoin. You can’t say I got a higher quality one or a more genuine one. In light of that, I see in the open market … not more than a dozen … probably as few as five, but not more than a dozen and I am committed to be one of them.”
He continued: “Now, whether this comes by standing on our own feet or getting into partnerships, mergers, acquisitions, which I think are the short-term future of our entire industry - as it becomes obvious to players who otherwise … have been fairly independent. So, that’s one of the trends that comes up. I wish the decentralized exchange (DEX) trend comes up sooner. But I see that as taking some time. It matches so well with the fundamental philosophy of the space that it should come sooner than later.”
He added: “But I [currently] can’t see light at the end of tunnel. I know that the tunnel will end somewhere, but I can’t see light at the end of the tunnel. And, when that happens, we would look at some play there. Technologically, we find ourselves very strong. My next 12-month target tends to actually carry the fundamental values of that day which we have always managed to convince people of … such as [our services] being easy-to-use, establishing trust, being one of the first to introduce [more advanced] technological features. For example, batching of transactions, which became the de facto standard before it was heard of … Zebpay was the first exchanges in the world to use that.”
One Of The First Exchanges To Add Lightning Network
Sharing with CryptoGlobe how Zebpay was one of the first crypto trading platforms to start integrating Lightning Network, Khurana noted: “Our developments in Lightning Network (LN) … I think soon we will be recognized as the largest node in March 2019. We also want to be the first [exchange] that allows withdrawal to the LN. I see ourselves as being the most transparent in proof of reserve … a concept where you don’t want to be a QuadrigaCX where you discover that you never had [the funds you thought you did] in the first place.”He went on to state: “If I were a regulator, these are the things I would focus on. I would say, you don’t get to touch the coins of the customers. And if you do, you need to constantly prove that you have it. And, technologically prove it, not just with auditors’ certificates. So, I think this is inevitable. Regulation is at this point focusing on not necessarily the most important parts of our industry. Given that we have custodial arrangement, trusteeship arrangement.”
He added: “There are so many similar good parts of the economy … I don’t see why they should not be imported here … at least in some form like proof of reserve, [it should be there to some extent,] like as it is in the stock market. But it will be as robust and probably more bearable because it uses a part of the algorithm or the underlying protocol to establish yourself. So, I see these facts which were known to a very small percentage of the people in the world … getting known to a large number of people. And, when that happens, people would trust us more, use our [services] more, and transact with us. So, that would be my 12-month target for Zebpay.”
Khurana On Customer Surveillance Technology
When asked about customer surveillance technology that leading American crypto exchange, Coinbase intended to use with their acquisition of controversial intelligence and analytics firm, Neutrino, Khurana stated: “I think they’re useful and they have their place. And, there are two reasons for that. On the one hand, if you were to say look at how banks do transaction monitoring. I’m sure that bad actors will invariably participate in any economic marketplace.”
He further noted: “Now, as one of the facilitators of this marketplace, to be told that you have to do your due diligence, I think is reasonable. [That’s] because it’s not just that it will make the regulator more comfortable towards you. I think it also protects your customers. So let’s say if money (Bitcoin) came from an unsafe resource and my customers buy it, and you know on the [block explorers] you can see that money went from the wrong place. At that point, my customers could ask me why you did not do anything about it.”He added: “I think that transaction monitoring has its place, [however] I do not know enough about what happened with Coinbase. And, I must say I’ve read all the news. But when I read news about Zebpay … I don’t completely agree with it. So, sometimes I used to wonder if one takes everything at face value … everything that’s written. I think it also had to do with the type of company they associated with and what those people had done in the past.
Coinbase customers were not [feeling] comfortable with that - as opposed to what they were promising … because if that were dodgy, then Coinbase itself would not have done that.He continued: “So, if one goes back to … what is it that your customer thinks about you … and can you fulfill it? So, for example, maybe some of the largest [crypto] exchanges in the world as listed on CoinMarketCap do not even [perform] know-your-customer (KYC) checks. And, they’re operating from a territory that seems to be okay with that, I assume. Now, we can’t bear to do this and we want the kind of customer who sees KYC as a good thing...even for them, right? But I am sure there are all kinds of customers. So Coinbase has to be careful about what kind of customers it has...and to fulfill that expectation as well as everyone of us including Zebpay.”