“The government does not consider cryptocurrencies legal tender or coin and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system,” Finance Minister Arun Jaitley told lawmakers in New Delhi on Thursday. “The government will explore use of blockchain technology proactively for ushering in digital economy.”
The message is loud and clear. Government is pro technology but against all illegal and illegitimate forms of it. Bitcoin and other unregulated cryptocurrencies are banned for once and all as per the union budget announcements.This will give tremendous impetus to blockchain adoption. Businesses and government won't hesitate to consider adopting the new technology. As a young nation it is very important to have a clear vision. The government has given a green signal to blockchain technology while stopping the unregulated cryptocurrencies like bitcoin. This will definitely reduce (if not end) bitcoin trading and exchanges in India.
Blockchain usecases are being explored not only in the finance sector but almost every sector and industry where there is a business network involved. Like subsidy distribution, regulating land records, small and medium enterprise (SME) financing, court cases, good governance etc.
Blockchain is in the early adoption stage. Transitioning into growth and maturity stage might take 5 and 10 years respectively or even more.
Some of the major developments happening in India :
a) State Bank of India has taken the lead in bringing lenders and tech companies together for using Blockchain technology to share information among banks which will eventually help prevent frauds and tackle bad loans. This initiative is termed Bankchain. SBI has also announced its plan to implement Blockchain technology in the management of Know Your Customer (KYC) protocols.
b) RBI is considering its own cryptocurrency which will be regulated and boost digital transactions
c) Reliance Industries is planning its own cryptocurrency JioCoin to develop applications such as smart contracts and supply chain management logistics. They are also exploring on IoT and blockchain technology for other projects.
d) Andhra Pradesh has partnered with Swedish startup ChromaWay to build blockchain solutions for land registrations and record keeping. It is also setting up a Blockchain Centre of Excellence and inviting startups and experts to set up the country's first blockchain state.
e) Mahindra Group and IBM developed a blockchain solution in 2016 to reinvent supply chain finance across the Mahindra chain in India
f) The NITI Aayog-led IndiaChain plans to implement a full-fledged blockchain infrastructure to compliment IndiaStack and leverage 'electronic Know Your Customer' (eKYC) using Aadhaar.
g) YES Bank, have implemented a multi-nodal blockchain transaction to digitize vendor financing for Bajaj Electricals, based on a smart contract.
Now let's understand the blockchain adoption and challenges from a PEST analysis. It is a form of external analysis and gives an overview of the macro economic factors to consider.
Political factors - Government's green signal to blockchain is definitely a big boost. It should clear many hurdles for organizations and businesses which are planning to adopt it.
Economic factors - Economic factors like interest rates, business cycles, government policies, wages etc do influence technology adoption. If the government policies for businesses and organizations working on blockchain is favorable, it will help blokchain to penetrate further.
Social factors - Blockchain adoption will be influenced by customers, culture, attitude, education and other demographic factors. In a diverse country like India social acceptance and mass adoption of blockchain will still take decades. Just to mention technology like e-sign has not been able to gain traction with the masses till date.
Technological factors - Microsoft, IBM and Intel have already laid the foundation for technology implementation. Dozens of startups have joined the league and accelerated the implementation process.
Summing it up, Blockchain is here to stay. Though it might take a decade for mass adoption but the use cases will certainly vary across all the industries and vertical. Not to forget it has its own challenges and hurdles to overcome like skill set, standards war, complexity, training etc.