Blockchain technology is the solution

K R Sudhaman

Mukesh Ambani Soon after Finance Minister Arun Jaitley announced in the budget in February this year that Cryptocurrency was not a legal tender in India, it has been reported that the Mukesh Ambani-led Reliance Jio is planning to launch its own virtual currency – JioCoin. Recently in Bengalure an ATM has been set up a private player for crypto-currency. Earlier British bank HSBC has executed India's first financial transaction using Blockchain for a deal involving an export by Reliance Industries to an American client. The Blockchain-enabled letter of credit transaction was for a shipment from the Mukesh Ambani-led company to US-based Tricon Energy, and helped reduce the time required to process the documents.
Venezuela, which is facing unilateral sanctions from the United States, has set up its own cryptocurrency called Petro to enable other countries make payments for purchase of oil from that country. It has even offered India a 30 per cent discount on crude oil purchases if New Delhi uses the country’s new blockchain technologybased cryptocurrency. Petro is the world’s first state-backed cryptocurrency tied to the South American country’s oil reserves.

Arun Jaitley Many see this as the safest cryptocurrency, as Venezuela has the world’s largest oil reserves of 300 billion barrels. The world’s largest oil producer, Saudi Arabia, is a distant second, with 266 billion barrels of oil reserves.
But there are varied views about cryptocurrency and Blockchain technology on which this digital currency operates. Some call it a bubble while some others see cryptocurrency as an insurance policy to protect against the conventional monetary system. Some feel it is prudent to keep a mix between Bitcoins and other methods such as cash and precious metals

Jaitley underlined that the virtual currencies, including Bitcoin, don't have any intrinsic value and are not backed by any kind of assets. Cryptocurrencies were not legal tender and those indulging in such transactions were doing it at their own risk.

A blockchain, originally block chain, is a growing list of records, called blocks, which are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. By design, a blockchain technology is resistant to modification of the data.
There are multiple applications of blockchain technology on which cryptocurrency operates. Blockchain solutions is a distributed database that maintains a continuously-growing list of ordered records called blocks and is deemed to be very transparent as all the stakeholders can view progress real time. Many domestic lenders, including ICICI Bank, SBI and Yes Bank among others are working on Blockchain solutions and count trade finance as one of the best use cases for the technology because of the ability to cut down on time.
HSBC's head of global banking and markets Hitendra Dave said blockchain has a transformative impact on trade finance transactions and enables greater transparency and enhanced security in addition to making it simpler and faster.
That apart, it can ensure cost effectiveness, quicker turnaround and also potentially unlock liquidity for businesses.
Jaitley, however, underlined that the virtual currencies, including Bitcoin, don't have any intrinsic value and are not backed by any kind of assets. Cryptocurrencies were not legal tender and those indulging in such transactions were doing it at their own risk. The Income Tax conducted a survey on nine major cryptocurrency exchanges to investigate instances of tax evasion. The Tax authority has reportedly found that there are 6 lakh active cryptocurrency traders in the country. Operations by cryptocurrencies are banned in India and hence all of them closed shop.

Nirav Modi The closure of exchanged after RBI’s warning that it has not given any licence or authorisation to any entities to operate such schemes or deal with bitcoin or any virtual currency. The government has already constituted a panel under Economic Affairs secretary to deliberate over all issues related to cryptocurrencies and propose specific actions that need to be taken.
Though government has banned use of cryptocurrencies, Jaitley himself announced that government would explore use of Blockchain technology, which has several useful applications. According former RBI Deputy Governor Usha Thorat, Blockchain technology can prevent Nirav Modi like bank frauds if adopted in the country’s banking and financial system. Nirav Modi cannot happen at all as under Blockchain, simultaneously the message goes to all concerned. Who has opened LC (letter of credit) and messages are sent to every user of the Blockchain.
It is very solid system as every transaction and its execution is recorded besides it cannot be reversed. So, smart transactions (like that of Nirav Modi) could be under check in block chain technology.
Diamond merchant Nirav Modi allegedly defrauded Punjab National Bank of over 11,300 crore. According to a report in United States Bankruptcy Court, Niravs) Modi companies used funds raised from one bank to repay outstanding letters of undertakings (LoUs) from other bank in vicious cycle that broke out only when the scam was exposed. Jaitley informed Rajya Sabha during the monsoon session that Mumbai branch of Punjab National Bank had issued a total of 1213 LoUs fraudulently to Nirav Modi group of companies since 2011.
Former RBI governor Raghuram Rajan, sometime back, had, however, expressed his concerns over the cryptocurrency such as the regulation of the digital currency, the volatility of the currency and the credibility issues And most importantly the anonymity of transaction will not merely exacerbate the economic condition of the world, but also it will pose a threat towards peace and tranquility by terror funding, smuggling and the like. Rajan however did not rule out possibilities of the virtual currencies in the near future with the further development of the technology.

Who thought 20-30 years back internet and mobile phone would become important and very useful tool in day-to-day life. Likewise Blockchain technology is work in progress who knows it could turn out to be revolutionary technology in digital system.
As of now India’s policy on Bitcoin regulation is still evolving and no legal framework exists. The RBI has cautioned against its use, informing users, holders, investors and traders dealing with virtual currencies that they are doing so at their own risk.
Investigating agencies worry about the absence of controls. They see any transaction using cryptocurrency and involving foreign exchange as a contravention of the Foreign Exchange Management Act (FEMA) and the FEM (Manner of Receipt & Payment) Regulations. Supreme Court has issued an appeal to the government to start the drafting of a regulatory framework to ‘control the flow of Bitcoin’ in the country.
Presently, there are over 1300 virtual currencies in operation worldwide. India has identified 11 exchanges dealing with virtual currencies. The value of Bitcoin have fallen by around 70% since its peak late last year. The value of leading coins such as Ether, EOS, Litecoin, and XRP have all fallen by over 80%, thousands of other cryptocurrencies have plummeted by 90-99%, and the rest have been exposed as outright frauds.
Nouriel Roubini, a professor at NYU’s Stern School of Business and CEO of Roubini Macro Associates, has expressed a view in an article in Project Syndicate that in practice, Blockchain is nothing more than a glorified spreadsheet. But it has also become the byword for a libertarian ideology that treats all governments, central banks, traditional financial institutions, and real-world currencies as evil concentrations of power that must be destroyed. Blockchain fundamentalists’ ideal world is one in which all economic activity and human interactions are subject to anarchist or

Under Blockchain technology, there are identified nodes. It has certain protocol, which can be changed but not retrospectively. Apart from its use in finance, Blockchain can be used for remittances, cross border transfers, stock markets, depositories and customs. It can also be used in healthcare, education and insurance, besides payment systems.

cryptocurrency trading. Fully 99% of all transactions occur on centralized exchanges that are hacked on a regular basis. And, unlike with real money, once your crypto wealth is hacked, it is gone forever. Wealth in the crypto universe is even more concentrated than it is in North Korea.
Roubini, who has been senior economist in World Bank and IMF earlier, is of the view that no serious institution would ever allow its transactions to be verified by an anonymous cartel operating from the shadows of the world’s authoritarian kleptocracies. So it is no surprise that whenever “blockchain” has been piloted in a traditional setting, it has either been thrown in the trash bin or turned into a private permissioned database that is nothing more than an Excel spreadsheet or a database with a misleading name.
In India there were allegations that cryptocurrencies were widely used particularly by politicians of ruling and opposition parties for money laundering, especially after demonetization. This was believed to be more rampant in Gujarat, where most of the exchanges once operated.
NITI Aayog is now working a Blockchain initiative called India Chain as the technology had wide application in digital economy.
Telangana, Andhra Pradesh, Maharashtra, Goa and Uttar Pradesh are using Blockchain technology for land records. Andhra Pradesh has already taken the lead. An expert group in RBI is also exploring the possibility of digital currency in the country.
Under Blockchain technology, there are identified nodes. It has certain protocol, which can be changed but not retrospectively. Apart from its use in finance, Blockchain can be used for remittances, cross border transfers, stock markets, depositories and customs. It can also be used in healthcare, education and insurance, besides payment systems.
Philippines is using for overseas remittances. Following US sanctions, Venezuela government has launched

cryptocurrency ‘petro’. It is backed by the country’s oil and mineral reserves including gold and diamonds.
Venezuela ambassador to India Augusto Montiel at a lecture on Blockchain and cryptocurrency by Usha Thorat, said his country had to go for cryptocurrency as “we have been financially and commercially blocked.
Because of unilateral US sanction, we cannot use dollar. We cannot buy food or medicine. There is humanitarian crisis. The country had to intervene.
Now thousands of euros, dollars and Yuan are waiting for November one to use petro cryptocurrency to buy oil.”
Thorat said the advantage of Blockchain technology is that it eliminates all intermediaries in securities market. It can be useful for clearing corporation of India to look at for wholesale clearing of foreign exchange. But she also warned cryptocurrency that uses Blockchain technology has several pitfalls that’s why many countries like India are wary of it. Cryptocurrency has security concerns and moneylaundering issues. It can also be used for terror funding, havala transactions, smuggling and other nefarious activities including tax evasion and avoidance.
There are plus and minuses of crypto currencies. But the technological platform on which it is based on Blockchain have several positive uses. As it is a fast evolving technology some minuses that it has can be corrected to make it full proof.
Crypto-currency, whether it is a bubble or not, only time will tell. It largely depended on the evolution proper regulatory mechanism by central banks, some of which are already looking at developing sovereign digital currencies, which could be regulated.
The G20 summit in Argengina in November end is also expected to discuss this issue threadbare.

(K R Sudhaman, a senior journalist, who has been an Editor Press Trust of India and Economics Editor in TickerNews and Financial Chronicle)



		EDITOR'S MAIL EDITOR'S COMMENT REALPOLITIK GLOBAL AFFAIRS FRANKLY SPEAKING BANK FRAUDS DATA WARFARE QUALITY OF GOVERNANCE POLITICO-ECONOMIC WISDOM QUALITY OF EDUCATION TAMIL POLITICS KARNATAKA BYPOLLS OPPOSITION PARTIES ANDHRA POLITICS CHANDIGARH DIARY HIMALYAN ECOLOGY HITS & MISSES OBITUARY BOOK BAZAAR BONE MARROW TRANS.. A PAGE FROM HISTORY SIGNS OF THE TIMES REMEMBERING PRES KALAM INTERNATIONAL FILMS YOGA IN DAILY LIFE ART OF LIVING Issue:December' 2018 Subscribe Now	BANK FRAUDS Blockchain technology is the solution K R Sudhaman Mukesh Ambani Soon after Finance Minister Arun Jaitley announced in the budget in February this year that Cryptocurrency was not a legal tender in India, it has been reported that the Mukesh Ambani-led Reliance Jio is planning to launch its own virtual currency – JioCoin. Recently in Bengalure an ATM has been set up a private player for crypto-currency. Earlier British bank HSBC has executed India's first financial transaction using Blockchain for a deal involving an export by Reliance Industries to an American client. The Blockchain-enabled letter of credit transaction was for a shipment from the Mukesh Ambani-led company to US-based Tricon Energy, and helped reduce the time required to process the documents. Venezuela, which is facing unilateral sanctions from the United States, has set up its own cryptocurrency called Petro to enable other countries make payments for purchase of oil from that country. It has even offered India a 30 per cent discount on crude oil purchases if New Delhi uses the country’s new blockchain technologybased cryptocurrency. Petro is the world’s first state-backed cryptocurrency tied to the South American country’s oil reserves. Arun Jaitley Many see this as the safest cryptocurrency, as Venezuela has the world’s largest oil reserves of 300 billion barrels. The world’s largest oil producer, Saudi Arabia, is a distant second, with 266 billion barrels of oil reserves. But there are varied views about cryptocurrency and Blockchain technology on which this digital currency operates. Some call it a bubble while some others see cryptocurrency as an insurance policy to protect against the conventional monetary system. Some feel it is prudent to keep a mix between Bitcoins and other methods such as cash and precious metals Jaitley underlined that the virtual currencies, including Bitcoin, don't have any intrinsic value and are not backed by any kind of assets. Cryptocurrencies were not legal tender and those indulging in such transactions were doing it at their own risk. A blockchain, originally block chain, is a growing list of records, called blocks, which are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. By design, a blockchain technology is resistant to modification of the data. There are multiple applications of blockchain technology on which cryptocurrency operates. Blockchain solutions is a distributed database that maintains a continuously-growing list of ordered records called blocks and is deemed to be very transparent as all the stakeholders can view progress real time. Many domestic lenders, including ICICI Bank, SBI and Yes Bank among others are working on Blockchain solutions and count trade finance as one of the best use cases for the technology because of the ability to cut down on time. HSBC's head of global banking and markets Hitendra Dave said blockchain has a transformative impact on trade finance transactions and enables greater transparency and enhanced security in addition to making it simpler and faster. That apart, it can ensure cost effectiveness, quicker turnaround and also potentially unlock liquidity for businesses. Jaitley, however, underlined that the virtual currencies, including Bitcoin, don't have any intrinsic value and are not backed by any kind of assets. Cryptocurrencies were not legal tender and those indulging in such transactions were doing it at their own risk. The Income Tax conducted a survey on nine major cryptocurrency exchanges to investigate instances of tax evasion. The Tax authority has reportedly found that there are 6 lakh active cryptocurrency traders in the country. Operations by cryptocurrencies are banned in India and hence all of them closed shop. Who thought 20-30 years back internet and mobile phone would become important and very useful tool in day-to-day life. Likewise Blockchain technology is work in progress who knows it could turn out to be revolutionary technology in digital system. Nirav Modi The closure of exchanged after RBI’s warning that it has not given any licence or authorisation to any entities to operate such schemes or deal with bitcoin or any virtual currency. The government has already constituted a panel under Economic Affairs secretary to deliberate over all issues related to cryptocurrencies and propose specific actions that need to be taken. Though government has banned use of cryptocurrencies, Jaitley himself announced that government would explore use of Blockchain technology, which has several useful applications. According former RBI Deputy Governor Usha Thorat, Blockchain technology can prevent Nirav Modi like bank frauds if adopted in the country’s banking and financial system. Nirav Modi cannot happen at all as under Blockchain, simultaneously the message goes to all concerned. Who has opened LC (letter of credit) and messages are sent to every user of the Blockchain. It is very solid system as every transaction and its execution is recorded besides it cannot be reversed. So, smart transactions (like that of Nirav Modi) could be under check in block chain technology. Diamond merchant Nirav Modi allegedly defrauded Punjab National Bank of over 11,300 crore. According to a report in United States Bankruptcy Court, Niravs) Modi companies used funds raised from one bank to repay outstanding letters of undertakings (LoUs) from other bank in vicious cycle that broke out only when the scam was exposed. Jaitley informed Rajya Sabha during the monsoon session that Mumbai branch of Punjab National Bank had issued a total of 1213 LoUs fraudulently to Nirav Modi group of companies since 2011. Former RBI governor Raghuram Rajan, sometime back, had, however, expressed his concerns over the cryptocurrency such as the regulation of the digital currency, the volatility of the currency and the credibility issues And most importantly the anonymity of transaction will not merely exacerbate the economic condition of the world, but also it will pose a threat towards peace and tranquility by terror funding, smuggling and the like. Rajan however did not rule out possibilities of the virtual currencies in the near future with the further development of the technology. Who thought 20-30 years back internet and mobile phone would become important and very useful tool in day-to-day life. Likewise Blockchain technology is work in progress who knows it could turn out to be revolutionary technology in digital system. As of now India’s policy on Bitcoin regulation is still evolving and no legal framework exists. The RBI has cautioned against its use, informing users, holders, investors and traders dealing with virtual currencies that they are doing so at their own risk. Investigating agencies worry about the absence of controls. They see any transaction using cryptocurrency and involving foreign exchange as a contravention of the Foreign Exchange Management Act (FEMA) and the FEM (Manner of Receipt & Payment) Regulations. Supreme Court has issued an appeal to the government to start the drafting of a regulatory framework to ‘control the flow of Bitcoin’ in the country. Presently, there are over 1300 virtual currencies in operation worldwide. India has identified 11 exchanges dealing with virtual currencies. The value of Bitcoin have fallen by around 70% since its peak late last year. The value of leading coins such as Ether, EOS, Litecoin, and XRP have all fallen by over 80%, thousands of other cryptocurrencies have plummeted by 90-99%, and the rest have been exposed as outright frauds. Nouriel Roubini, a professor at NYU’s Stern School of Business and CEO of Roubini Macro Associates, has expressed a view in an article in Project Syndicate that in practice, Blockchain is nothing more than a glorified spreadsheet. But it has also become the byword for a libertarian ideology that treats all governments, central banks, traditional financial institutions, and real-world currencies as evil concentrations of power that must be destroyed. Blockchain fundamentalists’ ideal world is one in which all economic activity and human interactions are subject to anarchist or Under Blockchain technology, there are identified nodes. It has certain protocol, which can be changed but not retrospectively. Apart from its use in finance, Blockchain can be used for remittances, cross border transfers, stock markets, depositories and customs. It can also be used in healthcare, education and insurance, besides payment systems. cryptocurrency trading. Fully 99% of all transactions occur on centralized exchanges that are hacked on a regular basis. And, unlike with real money, once your crypto wealth is hacked, it is gone forever. Wealth in the crypto universe is even more concentrated than it is in North Korea. Roubini, who has been senior economist in World Bank and IMF earlier, is of the view that no serious institution would ever allow its transactions to be verified by an anonymous cartel operating from the shadows of the world’s authoritarian kleptocracies. So it is no surprise that whenever “blockchain” has been piloted in a traditional setting, it has either been thrown in the trash bin or turned into a private permissioned database that is nothing more than an Excel spreadsheet or a database with a misleading name. In India there were allegations that cryptocurrencies were widely used particularly by politicians of ruling and opposition parties for money laundering, especially after demonetization. This was believed to be more rampant in Gujarat, where most of the exchanges once operated. NITI Aayog is now working a Blockchain initiative called India Chain as the technology had wide application in digital economy. Telangana, Andhra Pradesh, Maharashtra, Goa and Uttar Pradesh are using Blockchain technology for land records. Andhra Pradesh has already taken the lead. An expert group in RBI is also exploring the possibility of digital currency in the country. Under Blockchain technology, there are identified nodes. It has certain protocol, which can be changed but not retrospectively. Apart from its use in finance, Blockchain can be used for remittances, cross border transfers, stock markets, depositories and customs. It can also be used in healthcare, education and insurance, besides payment systems. Philippines is using for overseas remittances. Following US sanctions, Venezuela government has launched cryptocurrency ‘petro’. It is backed by the country’s oil and mineral reserves including gold and diamonds. Venezuela ambassador to India Augusto Montiel at a lecture on Blockchain and cryptocurrency by Usha Thorat, said his country had to go for cryptocurrency as “we have been financially and commercially blocked. Because of unilateral US sanction, we cannot use dollar. We cannot buy food or medicine. There is humanitarian crisis. The country had to intervene. Now thousands of euros, dollars and Yuan are waiting for November one to use petro cryptocurrency to buy oil.” Thorat said the advantage of Blockchain technology is that it eliminates all intermediaries in securities market. It can be useful for clearing corporation of India to look at for wholesale clearing of foreign exchange. But she also warned cryptocurrency that uses Blockchain technology has several pitfalls that’s why many countries like India are wary of it. Cryptocurrency has security concerns and moneylaundering issues. It can also be used for terror funding, havala transactions, smuggling and other nefarious activities including tax evasion and avoidance. There are plus and minuses of crypto currencies. But the technological platform on which it is based on Blockchain have several positive uses. As it is a fast evolving technology some minuses that it has can be corrected to make it full proof. Crypto-currency, whether it is a bubble or not, only time will tell. It largely depended on the evolution proper regulatory mechanism by central banks, some of which are already looking at developing sovereign digital currencies, which could be regulated. The G20 summit in Argengina in November end is also expected to discuss this issue threadbare. (K R Sudhaman, a senior journalist, who has been an Editor Press Trust of India and Economics Editor in TickerNews and Financial Chronicle)