The Future of Blockchain and Whether India Should Have a Specific Law on This Aspect?

Abstract

Since Bitcoin appeared in 2009, the digital currency has been hailed as a web marvel and decried because of the well-liked transaction vehicle for all manner of criminals. It has left nearly everyone without a computing degree confused: Just how does one “mine” money from ones and zeros? The answer lies during a technology called Blockchain, which may be used for far more than Bitcoin. A general-purpose tool for creating secure, decentralized, peer-to-peer applications, blockchain technology has been compared to the web itself in both form and impact. Some have said this tool may change society as we all know it. Blockchains are being used to create autonomous computer programs known as “smart contracts,” to expedite payments, to create financial instruments, to organize the exchange of data and information, and to facilitate interactions between humans and machines. The technology could affect governance itself, by supporting new organizational structures that promote more democratic and participatory deciding. That is because disintermediation ― a blockchain’s greatest asset ― subverts critical regulation. By ablation middlemen, like large online operators and multinational corporations, blockchains run the danger of undermining the capacity of governmental authorities to supervise activities in banking, commerce, law, and other vital areas. But as Blockchain and therefore the Law makes clear, the technology can't be harnessed productively without new rules and new approaches. The Indian fintech space has seen considerable developments take place over the past few years. The Finance Minister post his Budget Speech earlier this year when he stated that “the government will explore the use of blockchain technology proactively for ushering in the digital economy”. An inter-regulatory Working Group by the Reserve Bank of India (RBI) has been constituted to study regulatory issues relating to FinTech and Digital Banking in India. Notable states that have launched a host of initiatives to implement blockchain include Andhra Pradesh, Karnataka, Maharashtra and Telangana. In a bid to ‘strengthen cooperation in promoting FinTech innovation’, the Maharashtra government and the Monetary Authority of Singapore (“MAS”) recently signed a Memorandum of Understanding. 5 Indian banks that ran early blockchain pilots include ICICI Bank, Yes Bank, Kotak Mahindra Bank, and Axis Bank. In addition, Infosys, TCS, Wipro, and Cognizant were reported to have made significant investments in expanding their capabilities in the technology. Infosys and TCS were in fact the first two large companies globally to have rolled out the use of blockchain in core banking platforms. The use of blockchain in a variety of other sectors continues to be explored in several industry verticals. Governments too have shown interest in the technology for their own operations, with the U.K. and Delaware governments being significant backers. Significantly, the RBI’s research arm, the Institute for Development and Research in Banking Technology (IDRBT) released a report in January 2017 confirming the cost-savings, transparency, and efficiency advantages of the technology and recommending that the time is ripe for its adoption in India. As part of its activities, the IDRBT is engaged in a research project entitled “Distributed Center of Excellence for Blockchain Technology”, sponsored by the Ministry of Electronics and Information Technology (MeitY). Key objectives of the project include inter alia evolving a blockchain ecosystem around RD conducting research on issues and challenges related to blockchain usage in identified application domains and enhancing capacity building in blockchain technology.