Union Budget 2018 can be safely called a tech-savvy budget as it included all the buzzwords the tech world is gaga about. When artificial intelligence (AI), internet of things (IoT), blockchain, and cryptocurrency find their place in the Union Budget, it’s a sign they have become mainstream. This is probably also the first Union Budget that has dared to talk as high-tech as this.
Finance minister Arun Jaitley has clearly articulated in his speech that the government does not consider crypto-currencies as legal tender or coin and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system. This essentially means:
- Cryptocurrencies are not legal tender or coin
- The government will take all measures to eliminate use of these crypto-assets in financing illegitimate activities
- The government will take all measures to eliminate use of these crypto-assets as part of the payment system
If one were to read the fine print and between the lines, there are still grey areas in the FM’s wordings which leaves the scope open for “trading” in cryptocurrencies. The industry has therefore sought more clarity and details on the issue. “There wasn’t much mention of cyber security in this budget. At Davos the PM talked about cyber security as a focus area but that same ethos does not appear to be reflecting in the action on ground…Cryptocurrencies are not legal tender is a statement that was made earlier as well, and it is true and very likely that it is being used for illegitimate transactions. More clarity is important,” said Ankush Johar, Director, Infosec Ventures.
UNLOCKING THE POTENTIAL OF BLOCKCHAIN
At the same time, Jaitley has made clear the government’s intent to proactively explore the use of blockchain technology for ushering in a digital economy. This seems like a smart move as blockchain is essentially the underlying technology behind cryptocurrencies such as bitcoins, which has gained immense popularity in the recent past. The bitcoin prices remained above $11,000 between January 25 to January 30. The prices fell to $9,142 and fell further to $8,671 on February 3.
Technology research firm Gartner is however of the opinion that regulation of cryptocurrencies could have been a better option. “Rather than restricting cryptocurrencies, they can be regulated to prevent any adverse impact and risks while exploring blockchain side by side and leverage opportunities which are available with new concepts and technologies that they bring to the table,” says D.D. Mishra, Research Director at Gartner.
The government’s intent to use blockchain comes as good news for tech companies and startups in India. In its simplest form, blockchain can be explained as a shared ledger for recording the history of transactions that cannot be altered. A detailed explanation on how blockchain works can be found in this IBM infographic.
The benefits of blockchain come from these three elements:
- Distributed: It works as a system of record that is shared among participants of the business network, eliminating the need to reconcile disparate ledgers.
- Permissioned: Each member of the network has access rights so that confidential information is shared on a need-to-know basis.
- Secured: Consensus is required from all network members and all validated transactions are permanently recorded. No one, not even a system administrator, can delete.
Microsoft India said in a post-budget statement that its Azure cloud has been powering the exponential growth of blockchain. According to top market analysts and leading consulting firms, the top five industries that blockchain will likely disrupt by 2020 are financial services, government, real estate, supply chain management, and media distribution. Currently, most Microsoft customers using blockchain on Azure are financial services institutions, including insurance companies. However, the trend is rapidly shifting to other industries.
In India, among other strategic partnerships and implementations, Microsoft has partnered with Primechain (Pune-based blockchain startup) whereby Azure Blockchain is the exclusive cloud platform for BankChain, a blockchain consortium of 30 top banks. Primechain is creating innovative applications on top of Azure for near real-time cross-border remittance at near zero cost, real-time peer-to-peer transfer systems with automated reconciliation, end-to-end loan syndication process management, vendor onboarding, NDA processing, and vendor rating and many more. The State Bank of India, India’s largest bank is using Primechain’s blockchain-enabled smart contracts and KYC.
Last year, IBM announced its Blockchain Founder Accelerator to address the key challenges many early adopters and enterprise developers have identified through the development of leading blockchain networks. It aims to share this collective knowledge with enterprise founders to drive the rapid adoption of production blockchains. The program provides one-on-one mentorship and support by network founders and technologists across a range of needs such as business case development, network membership incentives, technical development, governance and legal issues.
Blockchain has already garnered a lot of interest among India’s tech startups and this year’s Budget is likely to further accelerate its growth. Several blockchain-based startups are already working to explore its potential in India and many more are likely to come up in the near future.
For instance, New Delhi-based Sofocle Technologies helps customers evaluate and implement blockchain technology in business domains like finance, insurance, healthcare, manufacturing, and logistics. Mumbai-based Cateina Technologies uses blockchain for specific areas like Supply Chain Finance, Insurance Document Exchange, and Warehouse Receipt Financing. Bengaluru-based EzyRemit is a fintech and blockchain company focused on changing the remittance market and eliminating the redundancies in the system.
Overall, the budget did have a tech appeal. Jaitley also announced the doubling of allocation on Digital India programme to Rs 3073 crore in 2018-19, as part of which, the Department of Science & Technology will launch various centres of excellence to promote research, training and skilling in robotics, AI, digital manufacturing, big data analysis, quantum communication and IoT.
The decision to restrict cryptocurrencies has seen mixed views from the industry and that surely needs more clarity and something that must be reviewed over time. The government’s intent to explore blockchain will surely give an impetus to the many startups and tech companies that are trying to find their feet on the ground.