In January 2021, the Ministry of Electronics and Information Technology released a draft National Strategy on Blockchain. The draft strategy identifies the potential for adoption of blockchain in India and envisages creation of a 'National Level Blockchain Framework'. This blogpost highlights a representation submitted by Ikigai Law as a response to the draft strategy.

In January 2021, the Ministry of Electronics and Information Technology (India) ("MEITY") released a 'Draft National Strategy on Blockchain' ("Draft Strategy").

The Draft Strategy proposes to create a 'National Level Blockchain Framework' which will be a multi-layered blockchain infrastructure that will host sector specific blockchains (such as blockchain for health, insurance, and education). Users will be able to access the infrastructure through a 'National Blockchain API'. The infrastructure will be linked with Aadhaar and e-Sign. It has identified legal and regulatory challenges to adoption of blockchain, including privacy related challenges; RBI's unfavorable views on cryptocurrencies; and impediments due to data localization requirements.

Ikigai Law submitted a representation to the government which can be accessed here. Our comments in brief are:

  1. The need to revisit data localization requirements: The Draft Strategy identifies data localization' as a challenge to adoption of blockchain, as data on a blockchain may be stored on computers/nodes located across the globe. We recommended that: (i) the MEITY should revisit its position on data localization; and (ii) exempt localization requirements for decentralized storage which enhances security.  
  2. The possibility of blockchain being viewed as a privacy enhancing technology: According to the Draft Strategy, privacy is not an essential feature of blockchain. We have given examples of organizations that are using privacy enhancing features on top of blockchains. We have also suggested that the MEITY should consider the recommendations of the French Data Protection Authority to enhance privacy protection on blockchains.
  3. The importance of approaching the blockchain opportunity from a global perspective: We highlighted that blockchain presents a global opportunity for Indian startups and companies and therefore any standards the government sets should be aligned with international efforts.
  4. The need for harmonization across regulators: As most of the innovation in blockchain technology is happening in the permissionless blockchain space; we suggested that the MEITY should work with the RBI and other sectoral regulators to come up with an inclusive framework for blockchain in India. Such framework should pave the way for innovation across the different blockchain models .
  5. The need for greater clarity on the role of different stakeholders: The Draft Strategy highlights that roles of the industry and start-ups will be identified for the formation of the National Level Blockchain Framework. However, it does not mention how such stakeholders will contribute to the framework. We recommended that the stakeholders should be invited to explore how they could best contribute to building the framework.

This representation has been authored by the team at Ikigai Law.

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