India's government wants to kill bitcoin, but it loves blockchain
The Narendra Modi government is looking to oust cryptocurrencies from India but has a lot of affection for blockchain.
The distributed ledger technology is becoming a hot favourite in Asia’s third-largest economy for solidifying information, alerting all stakeholders, and preventing tampering. So much so that, in his budget speech on Feb. 01, finance minister Arun Jaitley announced plans to adopt blockchain technology.
“The government will explore use of blockchain technology proactively for ushering in the digital economy,” Jaitley said.
Most commonly known as the technology underpinning the likes of bitcoin and Ether (of Ethereum-fame), blockchain is a digitised and decentralised public ledger of all cryptocurrency transactions. Stripping away the financial application, blockchain is essentially a bookkeeping platform that can be accessed by anybody on the internet but is owned by nobody.
“Once you have a blockchain, the big spreadsheet in the cloud serves as a record-keeping system that can’t be forged and can’t be reversed,” said Nicolas Cary, the co-founder and president of Blockchain (the company, not the technology).
Blockchain technology is already making waves in the southern Indian state of Andhra Pradesh.
The government there is working with Swedish startup ChromaWay to set up a blockchain-based land registry system that allows people to collateralise property, get loans, and invest against that asset. Tracking property ownership using blockchain allows people to circumvent disputes, frauds, and errors, while also lessening the administrative hassle of registrations and title transfers.
Registries around the world are currently logged in one of three ways: on paper, in a database as signed-pdfs, or as digital files in machine-readable form. The final state is where most land registries ultimately hope to end up, August Botsford, Chromaway’s chief security analyst, told Quartz. “It’s more efficient, and you can do more with your data, including analytics and automation,” he said. “If one views the process of moving land titling and registration to blockchain as a better and more future-proof way of achieving (the third option), then the price is very comparable with other large scale IT migrations.”
Andhra Pradesh’s neighbour, Telangana, too, is digitising its property documentation system.
Beyond land registries, blockchain can also put an end to other fraud like identity theft. To reduce the chances of getting hacked, a growing concern in India, the web-based platform can manage digital IDs. “Currently, if you sign up or pay for something on the internet, you turn over unencrypted personal info that gets stored all over internet…creating a honeypot that attracts attackers to breach that service,” Cary said. With blockchain, only encrypted, relevant information will be released whenever necessary.
A step ahead of other states in implementing the technology for land registries, Andhra Pradesh also entered into a partnership with cybersecurity firm WISekey, making it a frontrunner in securing citizen’s data as well.
Recently, the Maharashtra government called upon industry leaders, researchers, and others to devise ways of incorporating blockchain in e-governance operations. “The government is one of the biggest data creators and data consumers. Blockchain will bring in more efficiency, transparency, accountability, and accessibility in data flows,” the state’s chief minister, Devendra Fadnavis, said at the Maharashtra Technology Summit (MTech) on Jan. 17.
Amid all the talks of curbing cryptocurrencies, India’s central bank, the Reserve Bank of India, still believes that blockchain technology is ripe for adoption. Banks in India are already relying on blockchain to enable overseas transactions, international remittances, and other processes.
The spread of blockchain use in the private sector use of in industries like insurance, healthcare, manufacturing, among others, could also lessen significant burdens that befall the government.
“Capitalising on the block chain technology could open new ways of securing peer-to-peer lending transactions, boosting trade finance, fintech and information repository sectors,” said Sapan Gupta, the national practice head of banking and finance at law firm Shardul Amarchand Mangaldas. “By segregating the use of block chain from crypto-currencies reflects the government’s intention to use the technology in a gradual and safer manner, before it gets into concepts like replacing currencies.”
Using blockchain to monitor supply chains means the journey of a good can be tracked from sourcing to their sale by collecting information in the secured cloud-based ledger.
For instance, in the food and retail industry, shipments can be tracked and digitally recorded via a blockchain in real time. “This can save lives in the event of an outbreak of food-borne illness,” Daniele Bianchi, an assistant professor of finance at Warwick Business School, said. “This is obviously helpful both for consumers and the government. Especially in emerging economies whereby the supply chain is typically not easy to track.”
Just like identity theft becomes harder, meddling with critical digital assets—like patient consent records in the healthcare sector or insurance payouts—also becomes less of a concern since no single authority can modify the records. At Bajaj Finserv, the holding company of Bajaj Group’s non-banking financial company (NBFC) and insurance firms, blockchain technology is being used to simplify travel insurance claims. If a flight is delayed, that information comes to the system and the claim amount is automatically generated and paid without the customer having to even file a claim.
There are currently over 40 Indian startups working on blockchain technologies in various industries like finance, healthcare, cybersecurity, and logistics, according to Sangeeta Devni, a programme manager at the IT industry trade body NASSCOM’s 10,000 startups initiative. But real-world applications are still few.
After interviewing early adopters, both on the customer side and vendor side, consultancy firm Deloitte recognised a slew of deterrents to using blockchain technology (pdf) that exist in the Indian market. From a lack of awareness to a dearth of trustworthy vendor partners to cybersecurity concerns, various challenges persist.
“The main danger comes from hacking, that is, the innovation of the blockchain brings new type of attacks which are far less understood and much less mitigated as those occurring in conventional database management architectures,” Bianchi warned.
Such concerns notwithstanding, the Indian government seems rather bullish on blockchain.
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