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Blockchain And Cryptocurrency: The Future Is Now
Policy Matters is a global initiative focused on economic recovery from COVID-19 and centering on the economy, people, and vulnerable communities.
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Tell us a little bit about the work you do and your presence in India?
Currently, I’m the Chief Economist at a blockchain company called R3. R3 is a private company based out of the US that builds and maintains the blockchain platform called Corda. My work involves heading R3’s research program as well as advising on topics including cross-border payments, digital currencies, digital assets and trade finance.
In India, we have worked with payment providers like NPCI and banks like ICICI Bank to address some of the ongoing issues in the financial system.
How would you describe the key institutional mechanisms of blockchain in the US?
In the US, blockchain is mostly a project of the private sector. This is changing though, as commercial banks, and the US government are adopting blockchain for their day-to -day business.
How is blockchain relevant in a developing country context
Blockchain is a technology that every country in the world is looking into right now. Companies in Thailand are using blockchain to pay suppliers, and the Nigerian central bank is testing digital currencies. There is no country that is not using this technology.
In fact blockchain adoption is often quicker in emerging economies as a result of two factors. There is less legacy infrastructure that needs to be replaced, and the regulatory authorities are more likely to engage in writing rules for the new digital economy. Both of these factors make it a much longer path to deployment in countries like the UK or the US where hundreds of years of technology and rules have to be updated.
What changes do you see in the financial system led by stable coins and crypto expansion?
The adoption of new forms of exchange is doing several things to the financial system.
First, it is reshuffling the complex financial relationships that exist today. Blockchain doesn’t require intermediaries, so often existing actors will be shut out of the process. This is what is happening for example with DeFi (or, decentralized finance). While removing intermediaries reduces fees, it also removes the regulated entity, which means consumers are vulnerable to scams.
Second, it is updating the entire global financial infrastructure all at once. This presents a huge opportunity for developing countries. Normally infrastructure is updated solely so trends take decades to propagate across systems. This is no longer the case. In this environment, developing countries have exactly as much experience as advanced economies and are therefore able to influence the direction of innovation in a way that we have not seen before.
What has been the impact of the pandemic on blockchain?
Blockchain companies were surprisingly resilient during the pandemic. While they suffered from limited investment just like every other type of company, this had an unexpected benefit.
Since there was no funding to build out new features, many of our partners turned inward and spent their engineering focus on hardening the foundational platforms. So in the end we all came out of the pandemic stronger.
Where do you see the next big innovation in this field?
Blockchain continues to find new types of applications and use cases. No one ever thought that central banks would be leading the charge, but that’s where we are in 2022! For the coming year, there’s going to be a big focus on digital assets and currencies. For example, the Indian government just announced that it will introduce a state-backed digital rupee by 2023.
For more information on the series kindly contact our executive editor at large for public policy, Neeta Misra [email protected] who is based in Washington DC.