• India’s G20 presidency has been marked by an emphasis on leveraging digital public infrastructure (DPI) for inclusive growth and development
• India has emerged as a global leader in building DPIs such as Aadhaar, Unified Payments Interface, and the Open Network for Digital Commerce.
• As India leads the conversation on DPIs at the G20, it is an opportune moment to explore the innovation potential of emerging decentralized technologies like blockchain in designing such DPIs.

Benefits of using Blockchain Technology

• Blockchain technology enables sharing ledgers across multiple parties for recording information or transactions in a verifiable and permanent manner.
• Since the transactions are recorded and verified through a peer-to-peer consensus mechanism, there is no reliance on centralized intermediaries.
• Decentralised nature of blockchain eliminates the risk of a single point of failure, thereby creating a more secure ledger.
• The ledger can also be programmed to trigger transactions automatically through smart contracts.
• This creates vast opportunities for blockchain to offer new services and revamp existing legacy systems of recording transactions and information.
• The unique characteristics of blockchain such as immutability, auditability, and distributed verifiability promotes greater transparency and accountability and can help in reducing instances of fraud, cutting down costs, and thereby unlocking newer efficiencies.

Global blockchain technology scenario

• 46 countries had launched or were planning to launch over 200 blockchain initiatives.
• It is predicted that by 2025, blockchain would account for 10% of the global GDP.
• Blockchain experimentation for public sector use revolves around areas such as land registries, health registries, and the creation of digital identity.

Examples

• Estonia is a leading example of blockchain-based e-governance services.
• Blockchain forms the basis of select state registries including the property registry, healthcare registry, and business registry.
• Turkey has also announced its plan to launch blockchain-based digital identities for citizens.
• Singapore is also exploring the potential of blockchain to revamp its payment infrastructure.
• Colombia has tested a blockchain-based public procurement system to increase transparency and accountability in the public procurement processes, thereby reducing corruption.

What needs to be done before deploying blockchain for DPI in India?

1. Standardized terms of use

• Blockchain networks consist of multiple parties such as developers, network operators, end-users, miners, and external gateways.
• The relationship between such parties is generally governed by contractual arrangements.
• However, for blockchain networks that form the basis of any DPI and involves multiple parties, and processes sensitive personal information, it is important to have standardized terms of use.

2. Legal clarity and certainty

• Legal certainty governing blockchain use is critical for incentivizing participation in the network and scaling up such solutions.
• This has also been emphasized by 8 out of 10 countries that have released a national strategy on a blockchain, including India’s National Strategy on Blockchain.
• The failure to account for such legal certainty at the pilot stage has adversely impacted the scaling of such solutions.
• Existing legal and regulatory frameworks are designed around identifying central points of accountability and responsibility which may be at odds with the decentralized nature of blockchain, thereby affecting the legal feasibility of blockchain solutions.
• Legal recognition of blockchain-based records under national laws may also need a separate examination.
• Vidhi Centre for Legal Policy argues for a Governance framework that sets out quintessential terms of use for the adoption and operation of any blockchain-based solution so that it can function in a legally sustainable manner.
• For countries exploring blockchain technology in developing DPI, these terms of use will create an enabling environment for blockchain solutions, protect the rights of users/participants to the network, and protect the data stored on such systems.
• Such terms should include the examination of legal recognition of blockchain records under applicable domestic laws and the legal structure of the entity/entities developing the solution.
• The terms of use should also lay down data governance standards, risk management strategies, and the mechanism of removal and exit of participants from the network.

India must leverage its G20 presidency to deliver global legal certainty for blockchain use, given its innovation-potential for designing Digital Public Infrastructure. By developing a robust governance framework and global standards for emerging technologies, India can lead the way in fostering transparency, accountability, and security. Moving forward, nations must carefully consider the legal and technical aspects of blockchain deployment to ensure scalability while safeguarding users'' rights and data protection.