Blockchain Technology in India – UPSC GS3

Rise of Blockchain Technology (Cryptocurrency) Globally:
  • Satoshi Nakamoto created the most popular cryptocurrency, Bitcoin, in 2008, as a fully decentralised, peer-to-peer electronic cash system.
  • Since thenBitcoins have seen phenomenal growth in market value. For instance, Bitcoin, which was traded at just $0.0008 in 2010, commands a market price of $65,000 this April.
  • Many newer coins were introduced since Bitcoin’s launch, and their cumulative market value touched $2.5 trillion.
  • Their value has surpassed the size of the economy of most modern nations.
Blockchain in India:
  • India has followed approach of ‘bar what you can’t understand, ban what you can’t control’.
  • In 2018, the Reserve Bank barred our financial institutions from supporting crypto transactions, but the Supreme Court overturned it in 2020.
  • Further, the government has circulated a draft bill outlawing all cryptocurrency activities. It has been under discussion since 2019.
  • Reserve Bank has announced the launch of a private blockchain-supported official digital currency, similar to China’s digital Yuan.
  • However, launching official digital currency is impractical, and shows a lack of understanding of this disruptive innovation.
Why India is hesitant to accept cryptocurrencies?
  • Extreme volatility: For example, China’s recent crackdown on cryptocurrency wiped out a trillion US dollars from the global crypto market within a span of 24 hours.
  • Illicit Activities: It can be used as an instrument for illicit activities, including money laundering and terror funding as there are no regulations.
What is the significance of Blockchain technology?
The underlying technology of Cryptocurrencies is Blockchain technology. Blockchain network performs functions such as verification of transactions and contracts and the updating and maintenance of these records in the form of tamper-proof ledgers. It serves many purposes.
  • Can Remove financial intermediaries: Currently, intermediaries (including banks, credit card, and payment gateways) draw almost 3 percent from the total global economic output of over $100 trillion, as fees for their services. Integrating blockchain into these sectors could result in hundreds of billions of dollars in savings.
  • Can increase efficiency and transparency in Governance: Blockchain can make every aspect of e-governance, judicial and electoral processes more efficient and transparent.
  • Can make our digital space more redistributive and fairer: For instance, Tech firms, including titans like Google and Facebook, derive most of their value from their multitude of users. Blockchain could enable these internet customers to receive micro-payments for any original data they share in the digital space including ratings, reviews, and images.
Impact on Blockchain start-ups in India:
Regulatory uncertainty is hampering the growth of blockchain start-ups in India. For instance, blockchain start-ups worldwide received venture funding of $ 2.6 billion. Whereas, in India, less than 0.2 percent of the amount the sector raised globally have gone into the Indian blockchain start-ups
Way forward
  • India has been a late adopter in all the previous phases of the digital revolution. Like semiconductors, the internet, and smartphone technology (4G and 5G).
  • Currently, we are witnessing the next phase in a digital revolution led by technologies like blockchain.
  • Channelizing India’s human capital, expertise, and resources supported with the right policies will help India to make the most benefit of it.
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