[This blog has been co-authored with Indrajeet Sircar]
The Ministry of Electronics and Information Technology (MeitY) has put together a very comprehensive and forward-looking draft of the National Blockchain Strategy (Draft Strategy). The industry response around the document has been highly positive, and the industry is keen to collaborate with the Government in seizing the opportunity presented by distributed ledger technologies (DLT).
The industry has already started piloting various use-cases of DLT, with several industry members viewing DLT as a technology that is likely to have wide-ranging mainstream applications within an 18-month horizon. Accordingly, to gauge the industry’s feedback, we reached out to several domestic and international players, particularly in the Banking and Financial Services Industry (BFSI) sector, where early adoption of blockchain has been prominent.
The feedback received from the industry, is a collation of early-stage learnings that members have gathered from their initial pilot efforts, and the recommendations in the present submission are informed by these learnings. We also received some very helpful feedback from the industry in terms of the practical issues that might be faced in the eventual implementation of the framework, and on the potential use-cases that could be prioritised.
Highlights of the Submission:
I. Shortlisting Appropriate Use-Cases
At present, the Draft Strategy lays out several use-cases of DLT that could be prioritised. However, not all such use-cases would demonstrate optimal usage of the technology.
Use-cases such as management of birth and death certificates (listed at Page 8 of the Draft Strategy), would not be as optimal a use-case for DLT, since the information would not be altered through the course of multiple transactions. By contrast, a more appropriate use-case such could be land record management, where multiple transactions occur, giving rise to the need to reconcile multiple dynamic data attributes such as title, nature of rights provided (lease/freehold, etc.), and geographical boundaries of land parcels, thereby providing an appropriate test-case for DLT.
In this context, the MeitY could consider including a use-case validation framework, to enable the identification of solutions which should be implemented over DLT or a the Unified Blockchain Framework.
II. Role of the Government
At present, the role to be played by the Government towards achieving the stated objectives of the strategy are unclear. Therefore, one of the primary and consistent feedback points received from the industry, is the need for additional clarity over the role of the Government.
Government’s Role as Ecosystem Developer-In its ecosystem development role, the Government should consider closer coordination with various State Governments on their blockchain related efforts, and proactive engagement with top global and Indian companies and academic institutions working on blockchain technologies with a view to help develop blockchain ecosystem in India.
Government’s Role as Regulator-In its role as regulator, the Government should work closely with international counterparts and technology leaders, to formulate Common and Open Global Standards, together with sector specific standards required for the ecosystem in India.
III. Addressing Tokenisation
The scope of the Draft Strategy is largely limited to DLT and does not deal with tokenisation. However, the industry believes that tokenisation could play a significant role in incentivising ecosystem participation. Tokenisation can enable easier ways for organisations to host nodes and DAPPs.
The feedback received from the BFSI industry segment, highlights several potential applications of tokenisation such as:
- international remittances and settlement,
- trade finance, and
- intra-day liquidity management.
The Draft Strategy could consider exploring the potential benefits and risks associated with tokenisation. In particular, the Draft Strategy should explore the potential use-cases for exchange and utility tokens (i.e. not currency or asset-referenced tokens) that are unlikely to give rise to systemic risks.
IV. Data Privacy and Blockchain
The Draft Strategy should recognise the importance of sector specific adoption strategies in blockchain and DLTs when it comes to data privacy. Appropriate data storage strategies need to be adopted by the developers, operators and participants of the blockchain consortiums, in order to ensure compliance with applicable privacy and data protection regulations. The Government and the Draft Strategy could consider providing guidance under the Unified Blockchain Framework, as to what Personal Data should or should not be stored on the chain.
Moreover, the final strategy of the MeitY should be informed by and harmonised with requirements around data protection that are soon to be finalised under the ambit of the Personal Data Protection Bill, 2019.
V. Appropriate Legislative Changes for Enabling Wider Adoption
The Draft Strategy should also identify any existing legislative and regulatory bottlenecks that could inhibit the adoption of blockchain and DLT for critical use cases.The MeitY should work to identify similar bottlenecks (if any) to the adoption of blockchain, and suggest appropriate legislative changes required.
There are already several helpful proposals in the Draft Strategy relating to regulatory sandboxes for DLT, which could serve as a useful starting point for gathering learnings to inform legislative amendments.
VI. Platform for Lesson Sharing
The Draft Strategy should provide a platform for lesson sharing between the industry, Government and larger DLT and blockchain development ecosystem. In particular, the recommendations of the Draft Strategy should (wherever possible) be linked to lessons and experiences drawn from existing pilots.
This could be implemented in the form of a forum for regulators and Government departments to share and exchange views and best practices for enabling/ evaluating blockchain developments. Experts/ Practitioners should be invited to such forum for sharing latest developments. These could be sector focussed.
VII. Role of Universities in Skilling and R&D
Lastly, we appreciate the Draft Strategy’s emphasis on ecosystem development and capacity building. However, there is a scope to further clarify the role of other ecosystem participants, particularly, universities and research organisations. The Draft Strategy could consider identifying a few areas for the Government to invest strategically in R&D surrounding DLT/blockchain.
[A copy of the detailed submission is attached with this blog]
In case of any further clarifications, please write to firstname.lastname@example.orgemail@example.com .