On February 3, 2020, the Indian National Institute for Smart Government (NISG) published a draft “National Strategy on Blockchain,” which explains different use cases of blockchain in India along with some conclusions from ongoing pilot projects.
The draft recommends for the Reserve Bank of India (RBI) to issue a central bank digital currency while also targeting stakeholders such as government, enterprise leaders and citizens with the aim of demystifying the concepts surrounding blockchain technology.
The strategy is intended to be fully released in 2 parts. The first part deals with basic concepts, trust systems, the economic potential of smart contracts and blockchain, ease of doing business, and different ongoing use cases. Part two will be released in the coming weeks, which will mainly cover different recommendations for using blockchain technology in India.
The institute, in its strategy, examines blockchain technologies, smart contract applications, challenges to blockchain adoption, the societal impact of the technology, the role of government, and national strategy principles.
It suggests the regulatory approach to blockchain technology the Indian government could adopt, emphasizing that regulations should be based on the functions performed by the technology and not the technology itself.
Blockchain Adoption Within Existing India Laws
In addition to evaluating blockchain projects of various countries such as Estonia and China, the draft details the legal challenges in blockchain adoption in India.
It begins with a look at the April 2018 circular issued by the RBI, which prohibits banks from providing services to cryptocurrency companies.
The country’s Supreme Court recently concluded hearing the arguments against this banking ban and is expected to clarify whether ‘digital contracts’ executed on the blockchain are recognizable and enforceable by law.
Additionally, the draft points out a number of existing laws that are not adequate for blockchain technology, indicating that they may need to be revised to facilitate blockchain adoption in the country.
RBI Advised to Issue Digital Currency
The NISG also looked into the concept of a central bank digital rupee administered through a national permissioned blockchain that can run decentralized applications.
With over 1.3 billion people and a massive concentration of internet-enabled smartphones, India is one of the world’s biggest generators of online data.
The policy think tank argues in its draft that blockchain tech could allow the monetization of this data in a secure and decentralized manner, thus propelling India’s economy to become one of the richest countries in the world.
The bottomline is, the draft states that the advantage of offering a digital Rupee is to allow the Indian blockchain developers and entrepreneurs to create and run decentralized applications.