Mumbai: Even as Maharashtra made public its intention to have a blockchain-based ecosystem for government processes, experts and regulators have sounded a note of caution.
Banks officials and members of the Securities and Exchange board of India (SEBI), gathered on the sidelines of Maharashtra Technology Summit, said the technology cannot be used in the front-end operations at financial institutions or for digitising sensitive government information.
India’s market regulator is working to put in place a framework to regulate cryptocurrency transactions, built on the blockchain technology. The SEBI has also formed a committee on financial and regulatory technologies to regulate bitcoin transactions.
Meanwhile, Maharashtra has announced it will go the Andhra Pradesh way by blockchaining most of its functions by 2019.
“We should first ensure this does not become another dot com bust phase. Regulators for a valid reason are sceptical of the technology because users will ultimately ask how safe is blockchain when put to use,” a senior SEBI official said.
The banking panel at the summit, Mtech, is one of the four policy groups formed to deliberate on blockchain implementation and suggestions. Officials said while blockchain is a technology that allows people, who don’t know each other, to trust a shared record of events, essentially resolving uncertainties and building trust, all loopholes and uncertainties must be rid of before implementing the technology, especially in the public sector.
“There is not enough proof that the technology is hack-free and we must ensure that is the case before it is put to use for any front end operations,” said Mrutyunjay Mahapatra, deputy managing director, State Bank of India.
Those involved in establishing the blockchain framework in Estonia said the technology must be used for integrity purposes and should not be treated as a silver bullet to ever problem.
Estonia has been implementing blockchain solutions in healthcare, financial services since 2008. Today, the Estonian digital society offers over 3,000 public services to not only Estonian citizens, but to foreign citizens through the E-residency programme. “We created the blockchain framework in Estonia to mitigate insider threats. Any government which is thinking of implementing the technology must remember it is borne out of the necessity - data integrity,” said James Koo, president of Guardtime Singapore, the firm that helped the Estonian government use blockchain.
