India to Use Blockchain to Monitor Financial Instruments

India’s securities and commodity market regulator, SEBI, has announced the launch of a blockchain platform
The blockchain system, which will debut in April 2022, will be used to monitor the credit ratings of non-convertible securities and covenants closely
From a crypto-averse nation, India could be test-piloting a Central Bank Digital Currency by December this year
India now ranks as the second top adopter of cryptocurrency, with over 100 million citizens owning a crypto

The decentralized digital ledger of transactions, blockchain, has changed the financial industry significantly since its announcement in 2008. It brought decentralization, improved security, immutability, and the overall performance of networks.

Since its debut, Asian countries have been at the forefront of their adoption. While China and Japan were the first leaders of the industry, India is quickly catching up with the trend.

The Crypto Situation in India

India currently has the most cryptocurrency owners; 100 million Indians now own a cryptocurrency; an astonishing feat. However, cryptos haven’t always been accepted in the country. At the start of 2020, cryptocurrencies were still illegal in India following its 2017 banket ban of the assets.

The ban on cryptos was almost retraced at the start of 2021 with the “crypto bill.” However, the bill was met with much criticism and never passed. Balaji Srnivasan, the former Coinbase Chief Technology Officer, warned;

“India could get 20% poorer from what it could have achieved over the five-year term. It is almost like banning the internet for 5 years. The losses add up a lot. It would be a reversal of economic liberalization in many ways. It would basically be banning the financial internet from entering the country.”

Things have changed since then, with India ranked as the second top adopter of cryptocurrencies in 2021. In addition, the Reserve Bank of India (RBI) has advocated the use of a digital currency, with SEBI announcing the launch of a new blockchain network for the nation.

SEBI to Monitor Financial Instruments

India’s securities and commodity market regulator, SEBI, the Securities and Board Exchange of India, has announced that it will launch a blockchain network to improve its financial sector. The launch of a blockchain network is contradictory to some of India’s unfriendly stance against cryptocurrencies.

According to SEBI, the blockchain network will be used for Security and Covenant Monitoring of non-convertible securities. The market regulators will be using blockchain to closely monitor the credit ratings of non-convertible securities and covenants, which are terms inserted into a debt agreement.

In the announcement, the market regulators noted that;

The system will give permissions to the Debenture Trustees, Issuers,  Credit  Rating  Agencies etc. to update the data/information and would be accessible to other entities like stock exchanges, depositories etc

The DailyCoin team investigated the reaction of the Indian crypto community in regards to the news. While commending the use of blockchain technology, many traders have stated their concerns about the new margin rules of the SEBI system.

BitcoinWorld03 wrote,

This is a big step forward for #blockchaintechnology   application in India's financial sector. #Cryptocurency #CryptoNews #Bitcoin #Blockchain. https://t.co/wAdLbh0oIm

Commenting on the margin trade rules, which will take effect on the 1st of September 2021, Sai Sandeep wrote,

#SEBInewMarginRules

@SEBI_India Please do consider and Please Save Retail Investors

Please save Stock Market from Big Traders

Another user, Anagh Tiwari, advised,

Hello @SEBI_India, its good to see you promote uses of DLT tech.

How about taking time out & analyse how tokenisation of Real estates through blockchain & their listing can help.

Think about it, also #Crypto community please advise more use cases for @SebiRbiMca https://t.co/DJrvZYmlQc

On The Flipside

While India’s governing bodies look to adopt blockchain technology, it remains unfriendly towards cryptos
India’s Finance Minister, Nirmala Sitharaman, has stated that the country’s new laws around cryptocurrencies are awaiting approval from the Union Cabinet
If passed into law, we could see another blanket ban on cryptos in India

India Looking to Launch a Cryptocurrency

Many guesses have been confirmed by the governor of the Reserve Bank of India (RBI), Shaktikanta Das; India is getting a Central Bank Digital Currency (CBDC). On Friday, Shaktikanta Das announced that the RBI might launch a pilot of its digital currency by December.

While he opined that India needs to be extremely careful while approaching a CBDC, he stated some merits. First, replacing large cash transactions with CBDCs on blockchains will reduce the cost of printing, transporting, storing, and distributing currency.

India is not the only country heading down the path of a CBDC; the People’s Bank of China, Bahamas, the European Union, Switzerland, Lithuania, and a growing list of countries are testing the efficiency of a digital currency.

Why You Should Care?

Technology is evolving faster than ever, and blockchain is behind a significant portion of those changes. By adopting DLT, SEBI seeks to provide an added layer of security and transparency in the country’s financial instruments.