Crypto’s next chapter: Regulatory sandboxes, AI co-pilots and the rise of derivatives

A regulatory sandbox is a supervised testing environment for new financial products and processes. Companies can try an idea with selected users while regulators observe risks, compliance and consumer outcomes. This matters because digital assets move quickly, while rules for identity, ownership and tokenisation are still developing.

The article points to SEBI and IFSCA sandboxes in India’s capital markets. Chandra says crypto and web3 fintech companies could use similar access to test products, improve processes and address identity gaps as assets move on-chain. Tokenised corporate bonds are one possible area, although participation is currently limited to institutions.

Crypto-native fintech players have not yet received permission to enter these sandboxes. Opening them could let regulators learn from controlled experiments instead of reacting only after products launch. It could also support innovation and help digital-asset companies contribute to tokenisation, while keeping official supervision and risk controls in place.

The 2021–22 bull run brought strong activity to India’s crypto market, but the following tax measures changed its operating environment. Domestic exchanges had to deduct tax at source and work within a 30% tax framework. Menon argued that foreign exchanges did not face the same requirements, creating an uneven competitive position.

The market also changed by product type. After the bull run, spot-trading volumes declined. Futures and other derivatives began gaining traction, with Menon expecting significant adoption in India. This marked a move away from the earlier emphasis on directly buying and selling digital assets.

The result was a market facing both weaker spot activity and tougher conditions for Indian platforms. Menon called for the same rules to apply to domestic and foreign exchanges. Chandra said clearer regulation could encourage more capital to enter India, while sandboxes might give new digital-asset businesses a safer path to test products.

WazirX’s spot markets processed close to $48 billion in transactions during India’s 2021–22 bull run, according to Vice President Rajagopal Menon. That figure shows how large the earlier wave of direct crypto buying and selling became before the market changed direction.

After the bull run and subsequent tax measures, spot-trading volumes fell. Meanwhile, futures and derivatives began attracting more attention. Derivatives allow market participants to take positions linked to an asset’s price without relying only on ordinary spot transactions. The article does not give a later derivatives volume, so the comparison is about direction, not equal-sized figures.

Menon expects derivatives to see significant adoption in India. Exchanges therefore need infrastructure suited to more complex products, leverage and continuous risk monitoring. Pi42 was built specifically for derivatives rather than adapting a spot-trading system, reflecting how quickly this segment became important.

Crypto derivatives are financial contracts linked to the price of a digital asset. Futures are derivatives that set terms for a later transaction or settlement. They matter because traders can manage exposure or seek gains from price movements without using only the spot market. Derivatives can also involve leverage, which increases both potential gains and losses.

The article describes a clear market shift. Spot-trading volumes declined after the earlier boom, while futures and derivatives gained traction. Pi42 responded by building a platform specifically for derivatives, rather than modifying a spot-trading system. That design choice reflects different infrastructure and monitoring needs.

The article does not provide a precise reason for every trader’s preference. It does show that Menon expects significant derivatives adoption in India. As this segment grows, exchanges must strengthen leverage monitoring, alerts, observability and risk controls, especially because crypto markets remain open continuously.

A round-the-clock market removes the predictable maintenance window that traditional exchanges get when markets close. Traders can enter positions or face price changes at any hour. Exchanges must therefore keep systems available, watch risk continuously and respond quickly when something fails.

Mishra said activity can increase during evenings and weekends, partly after movements in US markets. That creates constant demands for observability, alerts and leverage monitoring. He also described production incidents that occurred over weekends when systems could not keep pace with demand. Pi42 was designed for derivatives from the outset rather than adapted from spot trading.

The practical consequence is that reliability becomes part of risk management. Weak capacity or delayed alerts can affect users when staff and systems are least prepared. Exchanges need infrastructure built for continuous operation, along with processes that handle incidents, monitor leverage and scale during sudden bursts of trading.

An AI crypto co-pilot can combine market data with indicators such as RSI and MACD. RSI estimates whether recent price movement looks unusually strong or weak. MACD compares moving averages to identify changes in momentum. Together, they can help an assistant flag possible entry, exit or review points. They are signals, not guarantees.

Before placing a trade, the system should check position size, leverage, available funds, price slippage and whether the order fits the user’s risk limits. It should also use tested rules, a paper-trading or sandbox phase, clear explanations and a human approval option. These safeguards reduce the chance that a noisy signal becomes an automatic loss.

The supplied article mentions AI co-pilots in its headline, but its available text does not describe their operation or safeguards. Its broader emphasis on KYC, leverage monitoring, observability and investor education supports a cautious approach. Any deployment should therefore connect automation to compliance, risk controls and continuous monitoring.

Safety begins with knowing who is using a platform and understanding how assets move. KYC helps exchanges verify customers, but the article notes gaps when identities must be checked on-chain. Risk management matters because crypto trades continuously, and derivatives can create leveraged exposures that change quickly.

Mishra links round-the-clock operations to observability, alerts and leverage monitoring. Exchanges need to detect unusual activity, system stress and positions that could become dangerous. Chandra says existing KYC requirements do not fully solve identity verification as assets move on-chain. These are connected controls: identity supports accountability, while monitoring supports timely intervention.

The market is still developing its regulatory framework. Better compliance processes could make onboarding less frustrating, since users may otherwise have to restart failed KYC applications. Clearer regulation, stronger technical infrastructure and investor education could support safer growth. The article also presents sandboxes as a way to test improved processes under supervision.