Blockchain is Ok, Crypto is Not: Why is the Govt Dilly-dallying on Web3?

While the government is using the blockchain technology for various purposes, it has been against the idea of blockchain-based cryptocurrencies.
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The Police department in Firozabad, Uttar Pradesh, has launched a blockchain-based portal for public complaints. The website—called ‘police complaint on blockchain’—will allow the public to file complaints or grievances online. Complainants will also be able to regularly check on the status of the case and get alerts on the progress of their complaints.

The most important part of it is that since it is based on blockchain technology, the information uploaded on the website is immutable. Once the complaint has been filed, it is permanent and cannot be removed or changed.

This development shows the seriousness of the government towards using blockchain technology and expanding its use-cases in different areas. 

Chains of blockchain

The Ministry of Electronics and Information technology (MeitY) has set up a Centre of Exchange in blockchain technology (CoE). 

There are four products developed by the department currently in use: Certificate Chain, Document Chain, Property Chain, and Logistic Chain.

The main goals of Certificate Chain are to prevent falsified documents, cumbersome document verification, and service delivery delays. The Central Board of Secondary Education (CBSE), one of the first organisations to adopt this technology, maintains its academic data on the blockchain.

Document Chain provides organisations with a uniform method for storing and retrieving any government document, such as caste certificate, driving licence, ration cards and other certificates. The revenue department of Karnataka, for instance, uses this technology to issue caste and income certificates.

Likewise, a blockchain-powered Property Chain system allows for the availability of a common property ledger—enabling a single source of truth.

The Logistics Chain is the online supply chain management system for any particular industry.

Along with these technologies, the government is expanding the implementation of blockchain in the payment system as well.

From public service to payments 

In 2020, the National Payments Corporation of India (NPCI) announced the launch of ‘Vajra Platform’ to make payments fast and secure. The platform was based on the blockchain technology that would automate clearing and settlement of payments—drastically reducing the need for manual reconciliation.

According to NPCI, the Vajra Platform is based on a permissions model which ensures that only approved parties can join the network. Once approved, they can deploy the platform using an API that will be provided by NPCI. 

Besides, the government is also planning to launch its own centralised bank digital currency (CBDC). 

According to experts, CBDCs will be recognised by the law and supported by the central bank, which cannot go bankrupt. It uses the same blockchain technology that supports cryptocurrencies; it is just as secure as cash and it is also practical as a payment app.

CBDCs will be distributed through commercial banks, preventing central banks from dealing directly with millions of consumers and businesses.

While the government is using the blockchain technology for various purposes, it has been against the idea of blockchain-based cryptocurrencies. 

Government cracks the whip on Crypto

The Indian government has been very strict on cryptocurrencies since the trading of virtual currencies gained ground in the country. The Reserve Bank of India (RBI) has been cautioning users, holders and traders of Virtual Currencies (VCs) that dealing in such currencies is associated with potential economic, financial, operational, legal, customer protection and other security-related risks. 

In the past few years, the Indian government has further toughened its stand on Crypto and plans to introduce a bill that will decide the legal contours of Crypto in India. 

According to latest reports, the government plans to take a final call on the fate of cryptocurrency after RBI’s Financial Stability Board (FSB) due in October, 2022. Further, it was claimed that the report will help the government create a legal framework around it. 

Meanwhile, in July this year, Finance Minister Nirmala Sitharaman issued a statement in Parliament and said that a “global collaboration” would be needed to initiate a ban on cryptocurrencies and digital assets effectively. This statement has sent positive signals for several stakeholders in the industry.

Besides, the recent announcement on CBDC (Central Bank Digital Currency) also hints towards the government’s acceptance of the popularity of cryptocurrency and how it is preparing itself to compete against it.

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