What is the status of Blockchain in India?

Blockchain and India

The love hate relationship between the technology and the state

The Blockchain community in India is going bezerk over the recent news of RBI instructing the country's financial institutions to not allow payments for purchase of crypto currencies in India. At the same time in this years budget session, Mr.Arun Jaitley the finance minister announced plans to adopt the Blockchain technology. “The government will explore the use of Blockchain technology proactively for ushering in the digital economy,” Jaitely said.

Courtsey: Indian Express

So what does the government actually want to do?

The Blockchain Technology

A Blockchain is a digitised, decentralised, public ledger of transactions. By allowing digital information to be distributed,but not copied, Blockchain technology formed the backbone of a new type of Internet. Originally devised for financial transactions, it formed the base of Bitcoins, but gradually the technology is gaining adoption on various other industries and different  potential uses across industries.

In simple terms, it’s just a network of computers that hold the same record of transactions and this is validated by each computer so the list keeps updating itself and records al the transactions. It has numerous advantages over other technologies.

Security is one of the major advantages, as Blockchain uses cryptography and encodes the transactions to not show what happened but to simply show that it happened. It’s like a mass accounting system owned by all.

Another important advantage of this technology is Smart contracts. These are basically contracts that can self execute themselves. Which basically means no third parties or agents are required to execute them. Which means savings in money and reduction of frauds.

Bitcoins

So Bitcoin isn’t just money. It actually is a system of digital currency based on the Blockchain technology and holds the advantages of Blockchain. Which means it’s decentralised and not controlled by anyone. So it is a system that allows exchanging value from a person to person without the need of any middlemen, but with full control.

The Blockchain technology also makes it cheaper to make transactions compared to other means of transferring values. Also the total number of bitcoins that will ever be mined is fixed at 21million. Hence the value of the bitcoins keeps fluctuating on the exchanges.

Since bitcoins eradicate middlemen and are non regulated, they are a threat to state economies and no country has officially backed it till date.

Why the Ban?

Bitcoin is an asset, not a currency. This is because the value of bitcoin is unstable and the transaction processing is too low compared to other systems in spite of it being based on Blockchain.

Also in India, a senior finace ministry official addressed “Let’s accept that it would not be possible to regulate it effectively.”

Taxation on income from Bitcoins, thefts and frauds and safeguarding the citizens interests is difficult with Bitcoins. Finance Minister, Arun Jaitely also quoted recently from his official position that crypto currencies are not recognised as legal tender in India.

India’s Blockchain adoption

Andhra Pradesh one of the southern states that’s just revamping itself after its split into 2 states, Telangana and Andhra Pradesh itself expressed its adoption of Blockchain in 2016. With a view to develop Visag, as a world class fin-tech ecosystem, the government expressed adoption of Blockchain.

This government headed by the Chief Minister Chandrababu Naidu, is known to work in favour of technology and is credited with bringing Facebook and Googles India headquarters to the state. Andhra Pradesh has also become the first state to adopt blockchain for governance. With two pilot projects; managing land records and streamlining vehicle registration, the Andhra Pradesh government has set an example and the state has plans to adopt blockchain across the entire administration.

In a conference held to bring together Maharashtra‘s economic leaders, the government also invited industry leaders and researches to device a way for blockchain adoption for e-governance of the state. “The government is one of the biggest data collectors and data consumers. Blockchain will bring more efficiency, transparency, accountability, and accessibility in data flows,” quoted the chief minister, Devendra Fadnavis at the Maharashtra Technology Summit in Jan,17.

Other states like Karnataka, Telangana , Uttar Pradesh and Kerala are also exploring avenues to adopting this technology for e-governance.

In spite of multiple measures issued by the RBI, the country's central bank still believes in adoption of the Blockchain technology . Banks in India have started adopting Blockchain to oversee their international transactions.

In a recent development over 250 corporates have joined the ICICI banks Blockchain initiative. The firms who have signed up are using the bank's blockchain application in international remittances for salaries, raw materials and payments to domestic vendors, a companies release said.

“We are also collaborating with peer banks and other partners to create a comprehensive ecosystem in the industry using blockchain and evolve common working standards to contribute to even a greater adoption of this government initiative,” said Chanda Kochhar, the managing director and CEO of ICICI bank.

Also, while speaking at WCIT India 2018, PM Modi stated “Disruptive technologies such as Blockchain and IoT, will have a profound impact in the way we live and work. They will require rapid adoption in our workplaces.”

The NITI Aayog, and initiative of the government is already working with experts, to draft an initial outline to explore blockchain and its transparency in adoption of e-governance. This draft will look at exploring the adoption across various departments in the government. This is completely different from the crypto currency frame work and is simply focusing on the use of blockchain to make the departments cost effective, efficient and transparent.

This shows how the government is trying to implement the uses of blockchain as a technology, but its trying to regulate Bitcoins and other crypto currencies which seems to be difficult. These are neither banned nor regulated. Despite all the fuss, the actor seems to be growing with the increase in the number of jobs in the space, institutions launching courses and technological companies ties up with the governments to train people on this technology.

I welcome your comments on this issue below. Or feel free to write to me at akshay@blockinventors.com for any questions.