Block Chain Opportunities for Indian Capital Market – Who will Benefit

Globally Governments and Regulators are leaning towards the adoption of Block Chain for community usage. European Union (EU) is working on blockchain enabled infrastructure for driving innovations in European society. Recognizing the significant benefit to society and economy, major EU Member States along with the European Commission have partnered to form the European Blockchain Partnership (EBP) for focusing on European Blockchain Services Infrastructure (EBSI).

On the other hand, United Nations believe that a significant portion of the World Population does not have legal identity and are unbanked. Legal Identity for everybody by 2030 is one of the key agenda of the Sustainable Development Goals of United Nations. In various parts of the World, Block Chain technology enabled platform will be assisting the Government to drive and achieve the agenda of inclusion and assigning authority.

Global banks and financial institutions are experimenting with Block Chain Solutions for cross border payments, Fx settlements, securities settlement etc. Many of the technological companies are working for offering block chain enabled enterprise solutions.  CLS Group which is one of the major Fx player in global Fx ecosystem, has collaborated with twelve international banks for piloting settlement on block chain enabled payment-versus-payment (PvP) platform, for mitigating the settlement risk.  More than 25 of the World’s 50 largest banks have joined JP Morgan, block chain network for using cross border payment facility. It has been reported that, State Bank of India has signed up with JP Morgan’s Liink platform for faster and efficient cross border transaction.  In the past, most of the big companies operating globally, have resorted to building some or the other form of block chain enabled services for its business, including supply and distribution network, contracting, sales, legal identity, payments, back-office data processing, record management, etc

Magnitude of Global developments points that, India is at an evolution stage of developing and implementing Blockchain enabled solutions. Encouraging part is that, NITI Aayog has recognized block chain as a promising technology. Though India is not in favor of private digital currencies, but has draft bill for proposed implementation of Sovereign digital Currencies.

 India cannot remain behind for long and will eventually catch up to what is happening globally. In next few years there will be a massive adoption of the block chain enabled solutions, both by the private enterprise as well as the Government. Recently SEBI prescribed guidelines for adoption of Distributed Ledger Technology, for keeping a check on the end-to-end lending process.  To enable the guidelines, facilitating platform for recording the block chain enabled transactions and monitoring will be developed by Depository and will be interoperable with platforms developed by peers. This experiment will lay the basis for rapid adoption of building Blockchain solutions in the Indian Capital Markets.

In time to come, Government will promote the Industry to catch up with the technologies. It is evident from the baby step being ken by the Regulators.  Many of the key functions e.g., financial services, healthcare, lending, securities settlement, land records, education records, digital identities, debt tokenization etc. will be managed by the platforms build on Block Chain Solutions. There will be three to four big platforms in future, which will be interoperable. The proposed New Umbrella Entity (NUI) can have a very large mandate and may play a huge role in redefining ecosystem. Big depositories company like Central Depository Services (CDSL), National Securities Depository Limited (NSDL) may adapt to the need of the future. NASDAQ is conducting securities transaction using block chain. In India, NSE is technologically savvy and may also evolve with time. In future, with regulatory approvals, some of the large broking platform, held by the banks, may shape up as a wallet companies for supporting the ecosystem. They may hold the digital currencies, tokenised securities, and provide other custodian services for holding digital assets.

Future is not too far. We are part of the interconnected financial systems. What is happening in Europe and US will also have an influence on Indian Capital Market and Financial Ecosystem. In few years from now, financial platform companies will be the biggest winner of the Block Chain disruption.

Bureau Galactik Views

(This is not an investment advice)

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