By Pratik Gauri
Being recently ascended to the position of the Fifth Largest Economy in the world, India can become a leader in the adoption of Layer 1 blockchain technology. Blockchain technology has proven to be a hot topic over the past year, driving wealth creation and innovation across the globe, especially in relation to virtual assets. While the technology has many applications beyond digital currencies, it has been widely touted for its ability to increase trust between two parties — even ones who may not know each other. In economies with low counterparty trust, this is a particularly useful feature.The signs of efforts to become a leader in Layer 1 blockchain technology are clearly apparent in India’s leadership in the development and implementation of CBDC and its ability to supply a massive trove of Web3 talent to the global IT market.
According to a report published by industry body NASSCOM last September, the crypto tech industry already employs 50,000 individuals in India and has registered a growth of 39% in the past five years. India’s rapid adoption of new-age technologies, its growing startup ecosystem, and large-scale digitally skilled talent potential is cementing the country’s position in the global Web3 landscape.Leadership has an important role to play in adopting new technologies and dealing with challenges faced in their adoption. This is critical for national leadership and support when it comes to adopting new technologies like Decentralized Ledger Technology (DLT), more commonly known as the blockchain.Both in terms of supporting the adoption of Blockchain technology and providing resources for needed infrastructure, the Indian government has been playing a critical role in providing both the impetus and encouraging the development of the technology across both the academic and commercial sectors.
One of the most critical reasons for blockchain adoption is because of the support it has gained from the Indian government. This interest in the technology would likely be hampered sans the regulators and other related bodies committed to exploring this new frontier in modern tech. Indeed, governmental financial and regulatory bodies have also made numerous statements about the potential of blockchain and the benefits of its adoption. The Institute for Development and Research in Banking Technology (IDRBT) has also partnered with experts in the field to understand the functionality which distributed ledgers could provide.
Even at the state level, government entities have encouraged entire industries to explore new potential products and their implications. This kind of support is necessary for innovation to flourish. The country has been quick in moving toward a digital economy with initiatives like Aadhaar, Demonetization, and the implementation of the new Goods and Services Tax (GST).However, despite its vibrant technology industry, India has so far struggled to remain at the forefront of blockchain innovation.Collectively, across India, upwards of 80% of the population works within what is called an informal economy. The informal economy relies heavily on interpersonal trust rather than formal contracts. However, the lack of documented contracts between parties leaves a great majority of citizens extremely vulnerable to fraud. With the immutability of records and the transparency, blockchain provides, both the trust amongst parties as well as accountability across financial systems could be improved. This vacuum of trust will not only spell an end to the high-interest rates charged across India as an indicator of low trust but will propel greater inclusion of the public that does not have access to financial services.
Introducing a layer one blockchain platform along with a CBDC, initiatives like Aadhaar, and Demonetization will go a long way towards bringing in the informal economy under the folds of a DLT layer and providing for needed trust between trading parties. An additional hurdle is preventing the faster adoption of blockchain technologies into financial markets. The Indian government, while favoring the development of blockchain technologies, strictly wishes for financial organizations to keep away from crypto markets. This stern rebuke and suspicion of crypto markets and financial institutions that deal or invest in crypto have hampered the efforts to introduce blockchain technology in the day-to-day transactions of everyday Indians.
India’s adverse opinion on digital or virtual assets can be clearly seen by a recent supreme court vote that decided to uphold the Reserve Bank of India’s (RBI) February decision to keep financial institutions from working with digital asset exchanges or related firms. Even though blockchain does not entirely rely on virtual assets, this decision has negatively impacted investments in India for the wider industry. Globally, innovative blockchain projects have funded themselves by issuing digital assets through initial coin offerings, which are analogous to traditional Initial Public Offerings (IPOs) but through the issuance of tokens or coins rather than equity shares. Despite these setbacks, India is one of the hotspots for Blockchain and Web3 Developers. Even though we don’t have a lot of web3 projects registered in the country, most of the back-end teams are based out of India. Indian Blockchain Developers are in high demand worldwide, and we can see that as a growing trend. This, in turn, would mean most resources except intellectual and human capital will become commodities. Human capital as a producer of knowledge-based assets and creative industries will become the world’s primary driver of economic growth.
The author is founder and CEO, 5ire
