The Steering Committee on Fintech headed by the Economic Affairs Secretary has submitted its Final Report to Union Finance & Corporate Affairs Minister Nirmala Sitharaman in her office in New Delhi. The committee had been constituted by the then finance minister Arun Jaitley in his Budget speech 2018-19. Other members of the committee included senior officials from Reserve Bank of India and the Securities and Exchange Board of India. The report outlines the current Fintech landscape in India as well as worldwide, and the issues related to its development. The report recognizes the need of emerging technologies like Artificial Intelligence and Blockchain across various industrial sectors and government initiatives in India. The report focuses on how these technologies can be leveraged to enhance the financial inclusion of SMEs, make the regulations flexible, and boost the fintech entrepreneurship environment in India.
The report recognizes the applications of Distributed Ledger Technologies like Blockchain across different industrial sectors and the wave it has created across the globe. The report mentions:
“DLT is being explored to facilitate tamper-proof, decentralized records of flow of commodities and assets across a supply chain by using trusted validation mechanisms. DLT is being explored to build digital identity systems. Its applicability is also being explored in the field of cross-border payments and remittances. The application of DLT has the potential to enhance efficiency and resilience and reduce transaction costs in a number of financial and non-financial sector applications. Financial firms have invested in blockchain-based systems for reducing transaction costs, providing better information security and privacy.”
Blockchain uses cryptography to protect identities and to secure information about transactions. The report also mentions that the developments in encryption and cryptography have enabled the creation of distributed ledgers that in turn make the market in virtual currencies like Bitcoin possible. The committee perceives cryptocurrencies like Bitcoin as a decentralized peer-to-peer payment network. Cryptocurrencies around the globe have shown tremendous growth and the numbers have increased from 500 in 2014 to 1993 in September 2018.
The report states:
“The mechanisms surrounding cryptocurrencies, particularly the Blockchain and Initial Coin Offerings (ICOs), are revolutionising the global fintech landscape. The issue of initial coin offerings has emerged as an innovative way of capital raising by fintech businesses.”
The report also states that the regulations on these tokens depend upon their characteristics and their purpose of issuance. These tokens can be grouped into two categories - Utility Tokens and Security Tokens. The report mentions how US’s SEC classifies a token as a security with the help of its Howey Test.
The report has landed initial positive glimpses in India’s cryptocurrency community as what they were trying to convey to the government about blockchain and cryptocurrencies has been identified by the Steering Committee. Sumit Gupta, CEO of CoinDCX, has expressed his optimism as following:
“We are delighted that the Steering Committee headed by the Economic Affairs Secretary has recognized the potential of emerging technologies like Artificial Intelligence, Blockchain, IOT, and Big Data. The committee has also acknowledged the innovations cryptocurrencies and ICOs have brought to revolutionize the global Fintech landscape. We have complete trust in the Ministry of Finance that they will take the required steps to promote the adoption of these technologies across all the industrial sectors of our country.”
India has enormous potential in its market for fintech startups to prosper. CoinDCX is making tremendous progress in its journey as more customers are joining our platform globally. We feel it makes eminent sense to let cryptocurrencies flourish in a controlled regulated environment. The report mentions the collaborations banks around the world are making to ease down the payment mechanism. Moreover, the report will encourage the citizens and startups to take embryonic steps in developing the correct understanding of the underlying technology as it is extremely vital for the acceptance and adoption of cryptocurrencies across the country.
Till then, Happy Trading!!!