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 disclosed the government’s stance 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 Finance Minister also noted that the government is not mulling over the possibility of establishing guidelines for using DLT by financial institutions.
Sitharaman stated that the reason for the government’s apathy towards DLT hinges on the fact that only a small number of financial institutions are using the technology. As a result of the small pool of banks using DLT, interoperability issues did not constitute a significant challenge for the financial industry.
Despite the lack of government interest, Indian banks are exploring using DLT in financial services. Sitharaman noted with keen interest the work done by the Indian Banks’ Blockchain Infrastructure Company (IBBIC) in verifying letters of credit using distributed ledgers.
“Further, IBBIC, which was incorporated with the objective of providing a platform for exploring, building, and implementing Distributed Ledger Technology (DLT) solutions for the Indian financial services sector, is currently working on scoping the implementation of domestic Letter of Credit (LC) issuance as its first use case through the platform,” Sitharaman said in her 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.
Dimming the hopes of a DLT future
Sitharaman’s comments have been interpreted as a huge blow to India’s thriving DLT ecosystem. Since the start of the year, civil society groups, in collaboration with educational institutions, have been striving to deepen the country’s web3 talent pool to attract international firms.
Sitharaman stoked the hopes of enthusiasts after she declared that the government is eyeing a 46% adoption rate of DLT in the coming years. The Finance Minister announced that the government saw the technology as “absolutely imperative” because it could revolutionize the financial industry.
However, the government has snubbed DLT in its quest to develop a central bank digital currency (CBDC) over security issues resulting from decentralization. The RBI has previously disclosed its preference for centrally-controlled conventional database infrastructure.
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