The Reserve Bank of India released a blockchain white paper: blockchain technology is mature enough

The Reserve Bank of India (India’s central bank) has now endorsed the innovative blockchain technology underlying Bitcoin, with the bank’s research arm testing blockchain solutions for core banking processes. More notably, the bank’s researchers have confirmed that blockchain technology is mature enough to serve as a core technology to support the digitization of India’s legal tender (rupee) .

The Institute for Development of Banking Technology (IDRBT) is the research arm of the Central Bank of India and the country's foremost banking research institute.

IDRBT recently released a comprehensive blockchain white paper, "Application of Blockchain Technology in the Indian Banking and Financial Sector", in which the department called blockchain technology a disruptive innovation and stated that some researchers in their department have been studying and learning about this technology over the past two years.

AS Ramasastri, director of IDRBT, revealed that they have consulted academics, organizations, banks and technology partners in the blockchain industry through research sessions, and have also developed and implemented a trade finance blockchain proof-of-concept used by regulators and banks. The results of this proof-of-concept implementation are "encouraging and give people confidence in the feasibility of blockchain technology."

Based on its findings on blockchain, particularly in the banking and finance sectors, the research organization boldly declared:

“After taking stock of various aspects of blockchain technology, including its sound foundation, adoption advantages, diverse applications being explored globally, security, privacy and scalability issues and potential countermeasures, we believe that India is ripe for adoption of this technology .

Bitcoin and Indian Digital Currency

Bitcoin is mentioned and explained many times in this white paper. IDRBT said that the most famous application of blockchain technology is "the breakthrough application of modern cryptocurrencies such as Bitcoin, because this technology has brought disruptive innovation."

India has been in the global spotlight recently after the government imposed a controversial and unprecedented demonetization policy in November last year. Since then, India has been facing a cash shortage and electronic payments have gained attention. The white paper points out that central banks around the world are working hard to move towards a cashless society, a reality that is affecting millions of Indians.

Given that the Indian government has received a large number of digital banking plans to encourage cashless transactions, IDRBT sees blockchain technology as a solution to digitize India's legal tender.

The white paper states:

From a technical perspective, we believe that blockchain technology is mature enough and stakeholders are fully aware of this technology, so the time is ripe to use blockchain technology to digitize fiat currency .

India’s central bank blockchain proof-of-concept (PoC)

The proof-of-concept from the RBI’s research arm uses emerging blockchain technologies such as smart contracts (the white paper also mentions Ethereum).

The PoC used the open source blockchain code of the Hyperledger project led by the Linux Foundation. The software of the project used Hyperledger Fabric 0.6.1 running on the Ubuntu operating system. This proof-of-concept blockchain simulated five banks and a regulated clearing agency to implement two use cases in the field of domestic trade finance - letters of credit and "enhanced information payment". The letter of credit use case involves payment-related data (payroll, contracts, invoices, etc.), which are shared on a single ledger.

Participants in the distributed ledger include IDRBT (coordinator), National Payments Corporation of India (supervisor), banks including Citibank, Deutsche Bank and prominent regional banks HDFC, SBI and PNB, and MonetaGO, a blockchain services company responsible for implementing the platform.