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Interest in blockchain technology across India grows despite lack of regulatory guidance

Interest in blockchain technology across India grows despite lack of regulatory guidance

By | India, News | No Comments

While India’s Supreme Court demands an answer on cryptocurrency regulation from the RBI, blockchain, the technology that supports digital currencies, continues to grow across the country. More and more businesses in India are helping further develop the use of the blockchain, highlighting the country’s appetite to remain at the forefront of technology, even when regulators struggle.

Earlier this month, India’s largest technology business, Tata Consultancy Services, (TCS) announced plans to further develop its blockchain technology abilities and create cross-industry solutions. TCS has already successfully created blockchain-based management systems. However, the intention to build five new blockchain platforms to support various activities between industries, highlights the firm’s commitment to the future of blockchain technology in India.

That news comes as US tech giant, IBM has created a cross-border blockchain payment platform, to help speed up transactions between financial institutions around the world, where the use of blockchain cryptocurrency transactions is regulated. Meanwhile, Facebook and Twitter’s CEO, Jack Dorsey are both investing in the blockchain and cryptocurrency industry.

This raft of blockchain and crypto news comes as Bitcoin, the original cryptocurrency has held above the $4,000 level last week, despite a downturn on Thursday.

Together, it all works to highlight that although Bitcoin and other digital currencies have had a tough 12 months or so, many savvy investors and business visionaries are convinced of the longevity of the system and are willing to back it financially.

But, while appetite for blockchain technology and cryptocurrency use remains strong, not everyone is completely ready to take that next step, including the Indian Government.

Cryptocurrency regulatory deadlock

In February, the Supreme Court of India gave the Government a 4-week deadline to release its crypto regulations. That regulation has been under consideration since April 2018, when the Reserve Bank of India stopped providing services to businesses and investors involved in cryptocurrencies in the country.

That led to a raft of legal cases, filed by crypto-related businesses and being heard by India’s Supreme Court, cases the court has said it will stop hearing, with or without formal RBI regulation on the currency. If the RBI fails to deliver, the court added that it will make its own judgement on the cases and adhere to that, going forward.

Fortunately, while this could represent a problem for businesses and investors interested in developing a cryptocurrency for India or working with them in the country, those who are more focused on the blockchain technology itself, can continue with their plans and investments.

Blockchain and India

Amid the crypto indecision in India, blockchain has gained support and new frameworks are being developed. Technologies have been created to help improve the security and management of data and messages, within single businesses and between multiple ones.

One of the reasons for this is the success of the country’s first Blockchain District of Telangana in southern India. In August 2018, The Telangana State Information Technology, Electronics and Communication Department (ITE&C) signed an agreement with IT services giant, Tech Mahindra. The resulting relationship has helped give India’s business and investor community an opportunity to incubate and develop domestic blockchain startups and companies.

Indeed, a recent report from Nasscom, the Indian IT and BPO industry’s trade association and Avasant, a global management consulting firm, shows that more than half of India’s states are working with blockchain-related initiatives. However, despite this activity, India currently accounts for just 2% of global blockchain startups.

Although blockchain isn’t solely related to cryptocurrencies, the lack of regulation on crypto in the country is undoubtedly holding some businesses back from developing their own blockchain systems and utilising the benefits of cryptocurrencies.

It’s likely the Supreme Court loss of patience with the RBI’s lack of workable regulation on cryptocurrencies isn’t solely due to the need for a formal judgement; its clear to many institutions across India, including the court, that the country needs some regulatory provision for crypto activity, however tentative.

At Red Ribbon we know that India has the potential to support the development of ground-breaking uses of blockchain technology. Our understanding of the economy, combined with our business experience, means we can help others share in that potential and opportunities as they arise.

Red Ribbon CEO, Suchit Punnose said:

India’s appetite to remain relevant in the continually developing industry of technology knows no bounds. The lack of regulation on one level hasn’t stopped the growth of blockchain, on another.

Spurred on by the success of one India state in the creation of new blockchain technology, more than half of the country’s regions are increasingly supportive of tech startups who can prove their ideas can benefit India on a domestic level and a global one, too.

Red Ribbon epitomises India’s attitude towards change and opportunity; we always assess every opportunity thoroughly and will take calculated risks on new and developing industries. Eco Hotels and Modulex are just two examples of how we’re willing to drive forward in industries we believe in, that will prove supportive of a sustainable future, for India and across the globe.

Regulating India’s Cryptocurrencies: The Power of the Eyebrow

By | India, News | No Comments

When the Governor of the Bank of England was called out of BCCI’s financial wreckage by the Treasury Select Committee in 1995, he was asked to explain his approach to prudential regulation: how would he assert the Bank’s authority over a rogue institution like BCCI in the future? The Committee then sat open mouthed as the Governor explained that his secret weapons were his eyebrows: he would raise them if he disapproved, and he would arch them with particular severity if he really disapproved of what was going on.

No wonder BCCI got away with it for so long…

There was, to be fair, a seed of truth in what the Governor had told the Committee: the problem was, it was a hundred years out of date. In the past the merest suggestion of disapproval from the Empire’s Banker would have been enough to have the most hardened fraudsters quaking in their boots. But those days had long since gone by 1995, which is why the Governor’s comments proved to be so risible. Empires rise and fall, but such hints and dark suggestions can still have their place in modern financial systems, as recent events have demonstrated.

In particular, the seemingly throwaway comment by Indian Finance Minister Arun Jaitley, in the Union Budget Statement of 1 February: he said that the Indian Government did not consider crypto currencies to be legal tender or indeed currency at all, and that steps would be taken to prevent their use in financing “illegitimate activities”. If the current Governor of the Bank of England had made that same comment it would barely have been reported at all let alone raise an eyebrow: but it would seem the Indian Finance Minister has much bigger eyebrows these days.

The comment caused immediate shockwaves across global crypto currency markets (currently being encouraged in the United States, albeit with more enthusiasm in Chicago than Washington). Bitcoin took a stunning and immediate nosedive, losing 17% of its value in a day and falling to a third of its December value within a further two days.

Although Prime Minister Modi’s Government has since clarified that the Finance Minister was talking about cutting off funding for illegal transactions (as indeed he did), rather than the continued existence of the fifteen or so crypto-currency exchanges currently trading on the subcontinent, the fact is that the Reserve Bank of India has been issuing repeated warnings against investing in digital currencies for months now, pointing out repeatedly that they carry substantial financial as well as legal risks. So, the comments made in the Union Budget Statement  (limited though they might have been) could actually point to future regulation of the sector in India.

India Regulate Cryptocurrency - Red Ribbon Asset Management

India Regulate Cryptocurrency – Red Ribbon Asset Management

Particularly so given some large Banks in India have already been working with the subcontinent’s crypto exchanges on their own versions of digital currencies so it would also seem counterintuitive to the wave of entrepreneurial energy sweeping across India at the moment, for the Government to rule out altogether regulating the sector in the future.

And at least if the Indian regulator does ultimately decide to step in and bring order to these evolving crypto currency markets, at least we know that his or her eyebrows will be big enough for the job.

While the government hasn’t yet introduced any restrictions on digital currencies, the threat that it might do so has spooked the industry. India’s central bank has also warned that those who invest in cryptocurrencies do so “at their own risk.”

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