If Bitcoin fulfils its promise, banks may go out of business: BACC Head

The total number of customers of Bitcoin exchanges across all players in India is about 5 million. Several customers trade on multiple platforms. Ajeet Khurana is the Head of Blockchain and Cryptocurrency Committee (BACC), Internet and Mobile Association of India (IAMAI). He is also the CEO of Zebpay, one of India’s oldest and largest appbased Bitcoin and cryptocurrency exchanges.

On a daily basis, 300 bitcoins are traded within Zebpay. In an interview, Khurana talks about the opportunities and threats in this space.

The only implementation of blockchain on a commercial, global scale is Bitcoin and cryptocurrency. At a macro level, blockchain is suitable for any system which needs a high degree of security in maintaining records of transactions such as banking, land, assets, and even voters list records. Any system where data is recorded and transactions take place is suitable for transition to blockchain.

For instance, if we need to know, whether someone has voted in an election, we need a system that can discern that a vote that has been recorded is one that has been cast actually.

Points of concern

Given that the technology is still in its infancy, there are key issues we see here. Like the speed of transaction. For instance, the stock market where thousands of transactions take place every second. At present, a blockchain system to deal with such high frequency transactions has not been implemented. Secondly, the architecture of blockchain allows every participant in the network to be effectively an owner. This is unlike the cloud architecture or the client server model where there are definitions of hierarchies of responsibilities.

Blockchain is oriented towards having a decentralised network.

Societally, we need to reach a point where we do not expect a central authority like the Centre, or the RBI or the Election Commission being the only custodian of our data. What has been seen historically is this singular authority tends to let us down. Instead we should have a decentralised system where there’s no one person or a group of persons blocking others from accessing the system. For instance, in the financial system, the RBI decides how much money to print and at what rates.

At the next level are the banks, which have a monopolistic power of sorts. An ordinary individual cannot perform banking activities as he or she would not have a banking licence. Imagine, if two customers of two different banks could transact with each other directly without an intermediary. This quick intermediation is the most attractive feature of the blockchain architecture.

It’s also the one which is being met with the largest resistance.

Many of our members are exchanges that transact in Bitcoin. Bitcoin is currently the world’s largest and most successful implementation of the Blockchain architecture. It could be said that Bitcoin introduced the very structure of Blockchain, prompting it to be used in other applications. If Bitcoins were to fulfil their promise, the first casualty would be the banking system as they would have absolutely no role to play.

Some banks are now discouraging customers in dealing with Bitcoin.

Blockchain offers an opportunity to change the paradigm, but there is a need to change the mindset for that to happen. We also need to create a supportive infrastructure and ecosystem so

that technology can be adapted by the majority, which needs to be prompted by the Government in the first place through a regulatory and policy framework.

As the government has not come up with any guidelines for us to operate, we have come up with the best practices employed by other operators in the financial ecosystem such as banks, brokerages and mutual funds. We are presently awaiting the committee report from the Department of Economic Affairs, RBI and others concerning recommendations on the nature of regulations for this sector.