India has no plans to set up a common blockchain platform for banks
India’s Finance Minister Nirmala Sitharaman has confirmed reports that the country will not be looking to create a common blockchain platform for banks after months of speculation.
Sitharaman revealed the government’s position in a written reply to the Rajya Sabha, the upper house of India’s bicameral legislature, that there are no plans to use distributed ledger technology (DLT) in the creation of a general platform for banks. The Minister of Finance also noted that the government is not considering the possibility of establishing guidelines for the use of DLT by financial institutions.
Sitharaman stated that the reason for the government’s apathy towards DLT depends on the fact that only a small number of financial institutions use the technology. As a result of the small group of banks using DLT, interoperability issues did not pose a significant challenge to the financial industry.
Despite the lack of public interest, Indian banks are exploring the use of DLT in financial services. Sitharaman noted with great interest the work being done by the Indian Banks’ Blockchain Infrastructure Company (IBBIC) in verifying letters of credit using distributed ledgers.
“Furthermore, IBBIC, which was incorporated with the objective of providing a platform to explore, build and implement Distributed Ledger Technology (DLT) solutions for the Indian financial sector, is currently working on mapping the implementation of domestic Letter of Credit (LC) ) issuance as its first use case through the platform,” Sitharaman said in his letter to Parliament
Sitharaman added that the Reserve Bank of India (RBI) had started a series of pilots to develop DLT-based applications under its regulatory sandbox initiative in collaboration with Indian financial institutions.
Dampening hopes for a DLT future
Sitharaman’s comments have been interpreted as a major blow to India’s thriving DLT ecosystem. Since the start of the year, civil society groups, in collaboration with educational institutions, have worked to deepen the country’s web3 talent pool to attract international firms.
Sitharaman raised the hopes of the enthusiasts after she declared that the government is looking at a 46% adoption rate of DLT in the coming years. The finance minister announced that the government saw the technology as “absolutely important” because it could revolutionize the financial services industry.
However, the government has rejected DLT in its quest to develop a central bank digital currency (CBDC) over security concerns arising from decentralization. The RBI has previously revealed its preference for centrally managed conventional database infrastructure.
See: BSV Global Blockchain Convention panel, Blockchain in the Middle East and South Asia
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