Telangana’s Pioneering Web3 Sandbox for Blockchain Startups, 8 Cohorts

Web3 Sandbox: In a move that could potentially have a far-reaching impact on the Indian blockchain and crypto industry, Telangana state Web3 regulatory sandbox for selected blockchain startups to test their solutions in a controlled environment is unique. The companies can also receive support in the form of mentorship, regulatory compliance, and collaboration with key ecosystem stakeholders.

Despite the global uptake of blockchain and crypto products and services, India is still grappling with a lack of robust regulations in this segment. Limited clarity around how innovative blockchain products can function in Indian markets has prompted many entrepreneurs to shift base to more crypto-friendly places like Dubai and Singapore. In fact, a 2022 NASSCOM report found that 60% of Indian Web3 startups were registered outside the country but hired their tech workforce domestically.

The Telangana government hopes that the launch of Web3 regulatory sandbox will address this brain drain of Web3 founders leaving India for lack of regulatory clarity. The Telangana Web3 sandbox, which is part of Telangana’s larger Emerging Technologies effort, features a continuous operating format. The governing council will review applications and approve participants at each meeting. Initially, the size of active participants will be limited to 10-15 who can exit as soon as they complete the testing process, which should not exceed six months.

The startups in the first cohort are Dygnify, SpotSpreads, Renai, EquiDEI, Finclus, Rariko, Zoth, and Rightsfually. The sandbox focuses on startups with solutions that could potentially have a significant impact on society, businesses, or the government. “Telangana government realized the potential of blockchain back in 2017. We have our own blockchain framework to help the government focus on pillars such as transparency, accountability, and privacy,” says Rama Devi Lanka, Director of Emerging Technologies at Telangana.

“The state is also working on several use cases such as e-voting for smartphone-based voting, seed traceability, and more,” she adds.

Working inside the controlled environment of the sandbox alongside key stakeholders such as banks could help startups build more understanding before they get into the market. The sandbox is unique in India since it’s the only government initiative to provide authorization, legal compliance, security, and authentication for disruptive blockchain projects that otherwise struggle with a lack of clarity around existing crypto regulations in the country. The observations on regulatory policies made in the sandbox will be passed on to regulatory bodies, and state-level policies will be drafted to implement the findings.

Telangana Web3 Sandbox aims to enable early-stage Startups

The Telangana Web3 sandbox’s partners include Sino Global Capital, Team Blockchain Lawyer, Devfolio, and more. As per Chainalysis’ 2022 Geography of Cryptocurrency report, India ranks fourth in crypto adoption and number one in DeFi protocol adoption. However, other use cases of blockchain—such as in supply chains, social media, mobility, and other sectors—remain nascent.

Telangana’s sandbox aims to enable early-stage Web3 startups from across sectors to close collaboration with government authorities. This will help them contextualize their products for the Indian market and meet compliance requirements. For instance, Dygnify has built a product to address SME credit gaps by channelling liquidity from digital asset investors. But it needs to meet compliance and regulatory requirements in India before it can address India’s MSME credit gap.

“Working with Telangana’s Web3 regulatory sandbox will help bring more clarity on how to execute such a use case in India,” says Nishant Nigam, Co-founder, Dygnify. “With this collaboration, we are looking forward to conducting pilots, receiving access to market opportunities, as well as getting feedback.”

By helping Web3 startups like Dygnify, the Telangana government aims to give central regulators a close look at the impact that disruptive, innovative blockchain products can have on India’s economy and society. The hope is that successful pilots and collaborations between these startups and established businesses will provide insights that will help shape more progressive and effective regulations that can unleash the full potential of blockchain technology in the country.

Through this effort, Telangana Web3 Sandbox aims to position itself as a leader in Web3 innovation and attract more entrepreneurs and investors to the region, ultimately creating more jobs and boosting economic growth.

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