India:

Ikigai Law’s Comments On The Draft National Strategy On Blockchain

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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.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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