Add blockchain power to data integrity revolution

India can capitalise on blockchain’s many benefits to prevent fraud, facilitate identity management, and monitor and streamline supply chains

Blockchain is often referred to as a silver bullet for lapses in data integrity. It is an immutable, decentralised, distributed, and public shared ledger or database that enables verified network participants to record transactions, track assets, and share other digital information across a network transparently. This promotes trust and traceability among all stakeholders.

The immutability of blockchain, or its resistance to manipulation, makes altering it a futile effort. Being a distributed registry, transaction records are held not by a single person, entity, or institution or within one legal boundary, but by multiple entities across the world. Thus, a single change would require changes and updates across the records of all these entities, making changes to blockchains computationally almost impossible to implement. This has made the adoption of blockchain technology an indispensable feature of the current discourse on data integrity.

India can also capitalise on blockchain’s many benefits to prevent fraud, facilitate identity management, and monitor and streamline supply chains. The public sector has long been plagued by issues regarding the accuracy of records. Fraud is a recurrent problem tied to physical recordkeeping and human involvement at the registrar’s office. Blockchain’s real-time information-sharing capacities can help in fraud detection and prevention by reducing opportunities for fraud and the costs and time involved in its detection.

RBI has selected a small group of banks, including SBI, HDFC, and ICICI, to participate in a blockchain-based pilot project focused on trade financing.

Managing the business needs

Blockchain technology has many more use cases, as pretty much all transactions can be validated through it. This would help the government do away with petty disputes, which is a major issue clogging judicial and administrative pipelines. This, in turn, will boost ownership and trust in records.

Web 3.0 is an effective means by which the public sector and governments can identify the beneficiaries of their schemes. Unfortunately, account duplication and impersonation are also rampant in government schemes such as Jan Dhan Yojna, with most cases of fraud occurring in the last mile. With millions of accounts being opened, how does one know that an account belongs to a particular person and not someone else? Moreover, how does one know that this person hasn’t enrolled themselves multiple times in these yojanas? We often come across reports of money being transferred to the accounts of deceased individuals. This again demonstrates the vast scope for the application of blockchain technology in India.

It is these same data integrity functions of blockchain that can help overcome financial fraud in banks. Frequently, the same assets are mortgaged across multiple banks, but banks have very little opportunity to verify this. Not only that, they have a tough time validating the integrity of even a single asset that is mortgaged. Blockchain can help authenticate relevant personal and property data and information quickly and reliably.

Today, using blockchain, a loan process can be completed in a matter of hours. If a bank can validate the blockchain identity of someone’s certificate, their land records, identity, and credentials can be verified easily, thereby substantially minimising the manual labour that goes into processing bank loans. Consequently, the use of blockchain provides ample opportunity for the public sector and the private sector to streamline their workflow and processes.

Driving the financial sector

The adoption of blockchain technology can help propel the rapidly evolving insurance segment in India, as recently highlighted by Debasish Panda, Chairman of the Insurance Regulatory and Development Authority of India (IRDAI). Blockchain can enhance data integrity to stem insurance fraud and help automate processes. Moreover, eventually, insurers’ beneficiaries can be paid in stablecoins, a type of cryptocurrency whose market value is pegged to an external reference asset, such as fiat money, exchange-traded commodities, or some other cryptocurrency. However, it is too early to make projections on stablecoins, with India still considering launching a digital currency.

The adoption of blockchain can help propel the rapidly evolving insurance segment in India by automating processes and reducing insurance fraud.

SEBI has asked depositories to adopt blockchain technology to monitor security creation and the covenants of non-convertible securities.

The adoption of blockchain technology, along with stablecoins, has the potential to block the multiple channels through which counterfeit currency is brought in and circulated. With almost 60% of India’s transactions being digital, moving closer to 90% could make it possible to roll out a cryptocurrency that is centrally managed within India, with transparency and accountability for where the money is going.

Considering the far-reaching benefits that blockchain technology can have in asset and transaction management, the call for the adoption of blockchain technology in India should be louder. There has been some progress, with the Reserve Bank of India (RBI) in 2022 selecting a small group of national banks, including SBI, HDFC, and ICICI, to participate in a blockchain-based pilot project focused on trade financing.

In addition, in 2022, the Securities and Exchange Board of India (SEBI) asked depositories to adopt blockchain technology to monitor security creation and the covenants of non-convertible securities. These initiatives can help create a more resilient system with better threat protection, due to the distributed nature of blockchain technology.

A more immediate and widespread adoption of blockchain technology could revolutionise India’s data integrity framework, preventing criminals from exploiting the system and saving the country millions of rupees.

By Kiran Vangaveti

Kiran is the Founder and CEO of BluSapphire Cyber Systems

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