Competition Commission paper on blockchain tech spells regulatory risk

Main monetary our bodies are trying extra severely at blockchain, the underlying expertise of cryptocurrencies like bitcoin. The Competition Commission of India (CCI), in collaboration with EY, just lately got here out with a dialogue paper on blockchain and its authorized ramifications. The 50-page doc, which has been reviewed by Enterprise Commonplace, retains the federal government’s stand to permit innovation in blockchain however factors to regulatory dangers as this expertise proliferates.

“Given the decentralised nature of blockchains, there might not be any identifiable host, or an operator and the nodes could also be unfold throughout the globe with transactions occurring between the nodes positioned in several jurisdictions. Due to this fact, in case of any authorized, coverage or regulatory situation, it’s obscure which jurisdiction’s insurance policies and regulations could apply,” the paper notes.

“Within the case of permission-less blockchains, community contributors could also be nameless or pseudonymous, ie, their identities should not recognized absolutely. In such a situation, policymakers and regulators are more likely to face enforcement challenges when it comes to figuring out liable entities and penalising them for wrongful conduct.”

As main functions of blockchain will doubtless be within the finance area, CCI is concentrated on the authorized buildings of such entities. The paper says that below the Indian legislation a blockchain could be doubtlessly understood to be an “affiliation of individuals” for authorized and tax classification, or could also be handled as a partnership the place “every associate could be held collectively chargeable for all liabilities of the enterprise and all private belongings of every associate are topic to seizure or lien by collectors”.

It, nonetheless, says that there’s little chance to carry somebody accountable for knowledge breach as knowledge in blockchain is immutable, not erasable and held by a number of contributors.

Given these issues, it’s unlikely that blockchain corporations shall be given a free hand to develop with out first structuring the enterprise below Indian legal guidelines. That mentioned, authorities and personal entities are being allowed to check blockchain in varied functions.

Among the many ongoing pilots, as famous within the paper, are:

* Espresso Board, in collaboration with Eka Blockchain Market, launched a pilot blockchain-based espresso e-marketplace to combine Indian espresso growers with world markets in a clear method and guarantee honest value realisation for the producers.

* NITI Aayog, Oracle, Apollo Hospitals and Strides Pharma Sciences, in 2018, piloted a blockchain-based drug provide chain resolution. The answer completely registers a drug’s document, together with its serial quantity, labelling and scanning, by its motion from a producer to logistics, from stockist to hospital, or from pharmacy to client, limiting the scope for the document to be deleted or tampered.

* The National Stock Exchange (NSE) has examined using blockchain for its ‘know your buyer’ (KYC) course of together with some Indian banks and undertaken a pilot for e-voting utilizing blockchain.

* The Authorities of Andhra Pradesh has introduced plans to make use of blockchain expertise for internet hosting land information and for streamlining the method of sustaining information pertaining to automobiles’ possession.

The anonymity of blockchain-based transactions is likely one of the key explanation why bitcoin buying and selling was banned in India in 2018, and is more likely to be banned once more as a part of suggestion within the soon-to-be-table Cryptocurrency Invoice.

In 2018, the federal government created an inter-ministerial committee to check and supply suggestions on cryptocurrencies and blockchain. In its report submitted to the finance ministry in 2019, the committee really useful a ban on cryptocurrencies and likewise formulated a draft legislation, the Banning of Cryptocurrency & Regulation of Official Digital Foreign money Invoice, 2019, which mandates a wonderful and imprisonment of as much as 10 years for dealing in non-public cryptocurrencies. The Invoice remains to be within the dialogue section.

The committee, nonetheless, mentioned the federal government ought to maintain “an open thoughts on the potential introduction of an official cryptocurrency”, whereas additionally look to deploy blockchain “for monetary companies resembling cross-border funds, mortgage issuance and monitoring, insurance coverage, securities and commodity buying and selling, collateral and possession registries, resembling land information”.

Earlier in 2017, the Reserve Financial institution of India had issued a white paper on functions of blockchain expertise for the banking and the monetary sector in India which recognized blockchain as one of many three pillars to drive digital transformation and innovation within the Banking, Monetary Providers and Insurance coverage (BFSI) sector.