The Indian government is promoting cashless, and the central bank has begun to study blockchain technology

Rage Review : The Indian government continues to pursue its controversial plan to eliminate cash across the country, and at the same time, a group of researchers at the central bank have called for an investigation into whether blockchain can help achieve this goal. Last week, the Institute for Development of Banking Technology (IDRBT) published its first major blockchain white paper, which not only outlines the overall structure of blockchain technology and its potential use in the Indian banking industry, but also emphasizes that now is the best time to evaluate how India's national currency, the rupee, can be digitized through distributed ledgers.

Translation: Flora

Will blockchain technology lead to cashlessness in India?

As the Indian government pushes ahead with its controversial plan to make the country cashless, a group of researchers at the central bank has called for an investigation into whether blockchain can help achieve the goal.

The Institute for Development and Research in Banking Technology (IDRBT), set up by the Reserve Bank of India (RBI) in the 1990s, published its first major blockchain white paper last week, including details of a trial application for trade finance.

In addition to outlining the overall structure of blockchain technology and its potential use in the Indian banking sector, the white paper also states that now is the right time to evaluate how India’s national currency, the rupee, can be digitized through a distributed ledger.

Narendra Modi

After being widely criticized for its move to abolish high-value banknotes in early November, Prime Minister Narendra Modi’s government has since laid out a two-pronged plan: Later that month, he called on Indians to accept digital currencies, while the government began amending laws to help implement the plan.

The Institute for Banking Technology Development believes that blockchain can help achieve its goals.

The entire report highlights the success stories of central banks in countries such as Canada and the United Kingdom.

The report authors wrote:

“From a technology perspective, we believe that (blockchain) is mature enough and awareness among stakeholders is sufficient that now is the right time to go all-in on digitizing the Indian currency, the rupee.”

Roadmap

The authors also suggest that India’s broader banking sector try other ways to experiment with blockchain technology.

First, the report recommends that banks consider building their own internal blockchain networks, both to help achieve training goals and as a means of testing what blockchain technology can mean for them.

The report states:

“Banks can build a private blockchain for internal use. This not only helps them train talent in blockchain, but also ensures they benefit from efficient asset management and cross-selling opportunities.”

The Institute for Banking Technology Development further stated that based on this, major banks can cooperate in the areas of AML/KYC, loan syndication and trade finance.

The authors add:

“In the banking and financial services industry (BFSI), other areas where BCT can be beneficially applied would include supply chain financing, bill discounting, alliance account monitoring, securities and task management system services.”

The development of blockchain technology in India

Given recent developments in blockchain technology, it’s perhaps unsurprising that the research team would call for wider use of blockchain in India’s financial sector.

Last summer, the Reserve Bank of India called on major domestic banks to study blockchain and work with the Institute of Banking Technology Development to develop possible applications.

Rama Gandhi

In a speech in July, Rama Gandhi, Deputy Governor of the Reserve Bank of India, said:

“Cloud-based computing, blockchain processing technology and virtualization of IT systems have unlimited potential for large-scale use. Banks can work with the Banking Technology Development Institute to research, test and develop the best uses.”

In mid-2015, Indian central bank officials pointed out that digital currency could not only strengthen anti-money laundering efforts, but also improve financial inclusion and reduce payment frictions.

Since then, many financial institutions and private stakeholders outside the banking world have begun exploring blockchain use cases and developing products using the technology.