SUMMARY
Sitharaman said that only a few banks were using blockchain and that too at a small scale
RBI is providing guidance to banks in developing blockchain-based applications under its Regulatory Sandbox initiative, the minister said
She recently said that Web3.0 utilities, such as blockchain, have the potential to change the way financial information is handled
In a written reply submitted before the Rajya Sabha on December 13, Finance Minister Nirmala Sitharaman mentioned that the union government has no plans to frame guidelines or establish a common blockchain technology platform for Indian banks.
Citing data sourced from the Indian Banks Association, Sitharaman said that only a few banks were currently using the blockchain technology and that too at a small scale. Owing to this, the minister said issues related to interoperability of various blockchain applications between different banks did not arise.
Speaking about other bank-led blockchain initiatives, Sitharaman said that the Indian Banks’ Blockchain Infrastructure Company (IBBIC) was looking to develop a use-case for the verification of letter of credit (LC) through its platform.
“Further, IBBIC, which was incorporated with an objective of providing a platform for exploring, building, and implementing Distributed Ledger Technology (DLT) solutions for the Indian financial services sector, is currently working on scoping the implementation of domestic Letter of Credit (LC) issuance as its first use case through the platform,” she said in her reply.
IBBIC is a consortium of 18 private and public sector banks such as ICICI Bank, HDFC Bank, Kotak Mahindra Bank, Canara Bank, and Standard Chartered. The body aims to build a blockchain-backed shared ledger to address concerns around verifying the authenticity of LCs issued in tangible form.
Besides, the Finance Minister noted that the Reserve Bank of India (RBI) has been working with and providing guidance to the banks in developing blockchain-based applications under its Regulatory Sandbox initiative.
Sandboxes are testing environments whereby new or untested products can be run securely and safely.
Hurdles Galore For Adoption
No clear guidelines has been a perennial problem plaguing the blockchain space. There have been no consolidated norms that govern this emerging space.
While RBI has maintained an implicit negative outlook on blockchain-based cryptocurrencies, the Centre has largely lauded the underlying technology itself.
While the government has shied away from expressing its opinions on emerging technologies, Sitharaman has, on record, stated that the usage of blockchain was ‘absolutely imperative’, adding that the government also supported the use of the same.
She recently said that Web3.0 utilities, such as blockchain, have the potential to change the way financial information is handled.
In a bid to promote the use of Web3.0 technologies, the government, in October, said that it would train more than 30 Lakh government officials in the use of AI, machine learning, and blockchain technology for effective governance and delivery of government services.
The space is also witnessing massive adoption with the rise of multiple use cases such as payment processing, cross-border transfers, data sharing, and deployment as digital IDs. The domain is likely to see more growth in the coming years, with the emergence of a more diverse and healthy blockchain startup ecosystem.
