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Is India missing the bus in blockchain?
India’s lack of official enthusiasm may be traceable to the other buzzword that is most often associated with the application-end of blockchain: cryptocurrency.
Representative Image / Unsplash
Mudrex is a crypto investment platform headquartered in the US, based substantially in India and operating in 100 countries worldwide. Edul Patel is the company’s co-founder- CEO and he recently shared his compilation of the top five countries who led the adoption of blockchain in 2023. The Big Five, in alphabetical order, are China, Estonia, Switzerland, Singapore and the US.
China leads in the widest adoption of blockchain-based digital currency and has integrated the technology across multiple verticals, from supply chain to healthcare. Estonia has pioneered blockchain for e-governance. Switzerland is an innovation hub that is being called the world’s crypto Valley. Singapore’s smart government initiatives are heavily into blockchain, while the US remains a global leader in incubating blockchain startups.
One nation that should intuitively have been in this club, is missing. Why is India, a country, whose digital payment mechanisms like UPI – the Universal Payment Interface – which account for the highest number of digital transactions in the world, worth $ 1.7 trillion in fiscal 2023, not a big user of, or innovator in, blockchain? This is a technology that, after all, makes virtual digital asset (VDA) transactions safer, more secure.
I’m guessing here that while innovation in blockchain continues apace, in India’s lively startup ecosystem, the lack of official enthusiasm may be traceable to the other buzzword that is most often associated with the application-end of blockchain: cryptocurrency.
Three years after announcing its intention to frame a law for cryptocurrency, there is still lack of clarity about the precise official position on virtual currencies, which have been around for a decade now. The time-tested technique of “if you don’t understand it, ban it” did not work this time. In 2020, India’s top court overturned a notification of the country’s central bank making it illegal for Indian residents to buy or sell cryptocurrencies.
Since then, there has been no formal regulation, though crypto currency exchanges have been brought under the ambit of a money laundering act and a General Services Tax or GST at 18 percent is levied for providing the crypto currency service. The GST Council would dearly like to additionally levy a stiff 28 percent on the crypto assets themselves, but at its last meeting in October this was postponed to a later day.
Meanwhile crypto currency operations continue, albeit in a haze of uncertainty. The Reserve Bank of India has floated a central bank digital currency of its own – the so-called Digital Rupee and some 20-plus banks are part of its pilots. Clearly crypto currency, albeit in an official avatar, has promise—it has attracted over a million users and a quarter of a million merchants.
But offshore cryptos are another thing. In the final week of 2023, a unit of the Indian Finance Ministry issued show cause notices to nine offshore crypto exchanges -- Binance, Kucoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfenex – for alleged noncompliance with India’s anti money laundering law, principally not registering their operation with the Ministry’s Financial Intelligence Unit (FIU). It also ordered blocking their websites in India, something easier said than done.
Dealing with offshore entities is always a dicey affair and it remains to be seen how effectively, the long arm of India’s law and (her tax collectors) can reach foreign operators, even those who have considerable customer bases in India.
But fear and loathing for crypto currency should not have the unintended consequence of somehow diverting from the gains and the inevitability of blockchain, a technology whose time has clearly come, not least for India.
Many decades ago, William E. Kennard, the (US) Federal Communications Commissioner during the Clinton administration, said something that resonated with me then and continues to be relevant today. He had in mind the incredible advances during those years, of things like the Internet, e-mail and the world wide web. “We cannot regulate against problems that have yet to materialize in a market that is yet to develop”, said Kennard, “We need restraint born of humility –that we cannot predict the future”.
He pleaded for what he called a High-Tech Hippocratic Oath: ‘I shall not harm’. Be it blockchain or its first big application in virtual or crypto currency, an attitude like this born out of humility, may yet see India take her place at the high table of innovation and application on this technology frontline.
The author is a veteran award-winning, Bangalore-based technology journalist, who served as the Information Technology Consulting Editor of The Hindu newspaper for a decade, after serving for over 20 years as an Indian defence scientist. He runs an India tech news portal, IndiaTechOnline. His column will appear fortnightlyADVERTISEMENT
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