Is it Time to Shift Your India-Based Web 3.0 Startup to Dubai?
If there was one recurring theme at several Web3 meetings in Bangalore, New Delhi, and Mumbai last month, it was Dubai. Mostly for entrepreneurs building on the Web 3.0 ecosystem (the so-called next version of the Internet running on a decentralized blockchain), despite uncertain regulatory conditions India-based web 3.0 startup companies are struggling in India amid high taxes. One in two founders who met at these conferences has moved to Dubai or is in transition.
This was also seen at the India-based web 3.0 startup conference in Dubai in March. The biggest of these were Binance Week and ETH Dubai, where Indians made up the majority of the participants, and the Twitter and Web3 Whatsapp groups were flooded with images. 75% of the participants were Indians, including Russians and Europeans, the founder of the Foundation, which guides and funds Web3 startup ideas and participates in these events. These meetings are no different from those in India. They help you meet like-minded people, form partnerships, and have more productive discussions about your products.
But it’s not just an event! India-based web 3.0 startup companies are moving to Dubai for several reasons. Just as the India-based web 3.0 startups have registered companies such as Flipkart, Ora, and Immovi in Singapore to “promote their business,” likewise, India-based web 3.0 startup companies are now in Dubai, Singapore, and the British Virgin. They have registered companies in the Islands and Estonia. The scene began to change rapidly after November 2021 as the crypto bill expected high taxes and strict crypto rules. Since then, more than 100 Indian entrepreneurs have moved to Dubai and registered companies, according to case data from industry executives.
Why are they moving out of India?
India is still a difficult place for India-based web 3.0 startups who prefer to register externally. With Web3, deciding where entrepreneurs will move, is just the delay. Web3 startups in India that have moved to Dubai in 2021 to build their companies, added that while regulatory clarity is part, the hostility that these start-ups deal with is different. Bank accounts are frozen and they receive notifications from various government departments. Asking for clarification does not provide assistance. Builders wonder if it is really worth the effort. Then they decided on moving to a place where they are welcomed, supported, and it is profitable to build. The reason is read like a long laundry list: unclear regulations, 30% tax on virtual digital assets (effective from 1 April), 1% TDS per transaction (from 1 July). Regular notices from government agencies and bureaucrats say that Web3 entrepreneurs and investors have no restrictions on the sale of tokens. These concerns have been exacerbated in recent weeks as Coinbase announced its entry into India, with crypto trading volumes on major exchanges declining by more than 50-70% and UPI payments on these exchanges ceasing.
When a startup is established, the initial stages primarily include product development and financing. This is still feasible in India, but most Web3 startups in India also have global investors, and leaving them gives more room to India. However, when these startups launch their own tokens listed on the exchange, it is of utmost importance to go out as the tokens determine the fate of the project. It’s thanks to individual and institutional investors that startups do not take the regulatory risk. Currently, India has no rules for activating tokens, which is an integral part of an India-based web 3.0 startup. Through these tokens, these startups build a utility that adds value. Apart from that, the founders of Web3 say that tokens serve as a fuel for the growth of Web3 startups, supporting community participation and incentives.
Every entrepreneur wants to focus on the product and its operations, not the regulatory part. The space is new and the government is trying to understand it, but this is an opportunity cost for entrepreneurs, and this is why they are moving out of the jurisdiction to avoid it. These start-ups are being built around the world, and many countries have introduced rules that favor entrepreneurs. So why not move where every six months a country devises favorable regulations and invites entrepreneurs with attractive rules? Many places are becoming the epicenter of Web3, but Indian regulations are hindering the growth of the country.
Dubai has become a small hub for the India-based web 3.0 startups. There are arguments that the cost of living in Dubai is so high that taxes are not the only reason to move. It’s impossible for anyone to get there, but everything is very simple. From meeting people for an hour to experimenting with buildings and traveling across countries, everything is in perfect harmony. Therefore, these young entrepreneurs share an apartment, stay and work together like a family.