FinTech disruption: Does India need Initial Coin Offerings?

Technology experts and heads of financial institutions debate the necessity and role of cryptocurrencies and initial coin offerings (ICOs) in fintech innovation.

Blockchain applications, smart contracts and faster-secure payments are few of the features that Initial Coin Offerings (ICOs) have proposed through their projects, pushing their funding close to a billion dollar in the first two months of 2018 globally. Although there is a lot of hype surrounding such projects, experts have hailed them as doorways to new innovative platforms boosting the realm of financial technologies.

Initial Coin Offerings (ICOs) are bringing in innovations that hold the potential to take the financial industry into a new trajectory. India is yet to experience a large-funded ICO due to strict norms when compared to other countries. The concerns for regulation has been hindering the growth of ICOs in India. But, the question is whether we need ICOs at all to get ahead in the world of fintech.

“ICOs are bringing in better technology. The more cryptocurrencies emerge, the more we will see transformation in different areas of fintech. We saw the same kind of evolution in the development of internet, which was also a highly disruptive technology,” told Benson Samuel - CTO & Founder- Coinsecure.

ICOs: Are they needed?

Most fintech leaders are still unconvinced of the impact of newer ICO and coins on fintech. Many say that most developments are already ahead of implementation and don’t require purchasing with crypto tokens.


“An Initial Coin Offering (ICO) is a process by which organizations are raising funds for technological research and expansion, using blockchain technology as the base infrastructure. By issuing cryptocurrency tokens, companies grant investors ownership rights for new technologies which can be later traded on the exchanges. In contrast to an Initial Public Offering (IPO), tech enterprises are issuing ICOs as they are currently unregulated and give the liberty of bypassing stringent capital-raising procedures.”

“To benefit from blockchain, we don’t need cryptocurrencies. We want to use blockchain for tangible solutions. By some estimates, by 2030 traditional banking services will cease to exist. Blockchain has the potential to build the new banking infrastructure, and we don’t necessarily need to use cryptocurrencies for this. The tokenization can be used for settlement without using cryptocurrencies. Regulators don’t have a favorable view of them. We can use the underlying tech to reduce the cost of transactions and help individuals using it,” says Sudin Baraokar, Head of Innovation- State Bank of India.

On the other hand, those closely associated with cryptocurrency projects say these tokens make an integral part of a blockchain protocol, without which the protocol may not work as efficient as intended, for purposes such as scalability.

“Blockchains cannot run on the national level without cryptocurrencies and every blockchain needs its decentralized token for transparency across its nodes,” told Benson Samuel.

The legal perspective on ICOs

Nations like China have outright banned new ICO projects, citing rising cases of fraud and extreme speculation. Regulatory bodies of other countries, particularly the US, are keeping a close eye on ICOs and have barred ICO projects that don’t register their tokens as securities. As the market for ICOs takes off in India, it will be interesting to see how the upcoming governmental regulations have an impact. 

“When we think of cryptocurrencies, it has serious legal ramifications. We first need regulation to classify the different types of cryptocurrencies to deal with them accordingly. Currently, we have over 1000 cryptocurrencies, with newer ICOs coming up every month. Also, this industry is still immature to take a definite legal stance,” says Anirudh Rastogi, Managing Partner, TRA Law.

We have witnessed a cryptocurrency boom in the last 6 months, owing to multi-billion dollar investments in virtual coin tokens. While a few are calling it a fad, most experts have recognized the prospects of blockchain and digital currencies to have a profound effect in shaping India’s financial sector infrastructure for the coming years.