Mr. Prasanna Lohar sheds his insights on the transition from Web 2.0 to Web 3.0 in a candid conversation with Peak Blockchain Analyst.

Like every other nation, India is also catching up with Web 3.0 and its technology, blockchain, and virtual currency. The government of India has recently announced the establishment of its own blockchain framework. Keeping in mind the transformation of sectors that can benefit from the new technology, there are forty-four sectors, which include e-governance, pharma, education, farming, energy, and more. 

Last month, at India’s biggest cryptocurrency event, Metamorphosis 2022, Peak Blockchain analyst Tanuja Chaudhary had a chance to speak with Mr. Prasanna Lohar, CEO of Block Stack, and got some in-depth insights on where India stands globally when it comes to the adoption of blockchain and how it seems to align its vast population and government policies at the same time. 

Dr. Tanuja Chaudhary from Peak Blockchain asked a few questions to one of the best in industry experts, Mr. Lohar, on the transformation of technology from Web 2.0 to Web 3.0 in the Indian financial institutions.

Q: Being a decision-maker in the Web 3.0 sector, can you tell us something about the current scenario of the Indian market? How difficult or easier would it be for the Indian banks to move from Web 2.0 to Web 3.0 or to integrate blockchain?

Eventually, everyone needs to understand that Blockchain is only a solution for some industries. Today, nobody is selling Blockchain. What they are selling the special use cases, the use cases for India and the Indian ecosystem as far as the service industry is concerned. For example, how can India have decentralized KYC in the banking sector, how can we have Central Bank Digital Currency (CBDC), and how can we have fraud reporting on the blockchain?

Whenever more than two banks are involved, or more than two statements are involved, it is a viable blockchain use case. So people need to understand which are those use cases. 

At present, we need a mindset change and more education and research. Mindset change for the decision maker to adopt blockchain for a particular use case. In my opinion, that is now happening from the top governance, in the Indian government, where they have a national strategy in which I am also involved. Even NITI is also working on some use cases. If you talk about regulators, such as the reserve bank of India, Security and Exchange Board of India (SEBI), and IFSCA. States like Bihar are also working on blockchain.

Moreover, they are asking banks to adopt and integrate blockchain. So, now blockchain technology is not limited to innovation at one bank but a consertion use case. Industry, such as aviation and healthcare, have already understood the power of blockchain.

 

Q: The key aspect of blockchain is decentralization. On the contrary, RBI is bringing digital central currency. What is your opinion on this? What are the pros and cons of that?

So when you talk about digital currency or a central bank digital currency, it has four aspects, the first being the monetary policies – how the monetary policies will change for virtual currency ahead of paper currency. The second is whether it is centralized or decentralized, blockchain or non-blockchain. The third is whether it will be token based or account-based, and the fourth is retail or wholesale.

Once countries understand these four aspects, they can choose a way to implement, centralized or decentralized. But most of these things are centralized. Regulated by the government, so eventually, most of the CBDC execution is on a hyper ledger or a similar kind of ecosystem, a private network. CBDCs will never be decentralized. On the other hand, what can be decentralized are other use cases that these CBDCs can back. For example, decentralized Bitcoin backed by CBDCs of India, decentralized Sugarcane Coin, or Solarcane coin. So, that is how we look at those decentralized coins in hybrid use cases. So, both aspects of decentralization and centralization work hand in hand. 

Eventually, decentralization will prevail as that is what the need of economy, but every use case will be different.

 

Q: The regulatory policies and framework for blockchain, cryptocurrencies and CBDCs will be similar in India for the private and public sectors?

Whenever any authority releases a regulatory guideline, it is released based on use cases and not on any specific technology or segment. Though use cases are bound to retail, private, corporate, or only for certain users, that is how it operates. For example, digital lending regulatory guidelines were released for the companies on how they can do it with credit licenses. Previously, most of the companies were doing it without credit licenses. Bringing the regulators brings much transparency for the end user, and their money is safe. Regulation is based on more than just one particular aspect. However, it is framed keeping in mind the data interaction, security, technology used, and the process involved.

If you look at the RBI concept note for digital currency, it talks about various aspects, from technology to scalability and customer grievances to security and functionality.

 

Q: Adoption of CBDCs in India is early; RBI has also introduced a pilot program for a few banks. What, according to you, is the future of CBDCs, and how will the common people perceive it? What role can the government play in the adoption of CBDCs?

 

A.CBDCs are being introduced for multiple purposes; one is that as the cryptocurrency industry is booming, countries like China are bringing their CBDCs, pushing them forward to act as a powerful currency, even ahead of the US. This is why every country needs to bring their CBDCs ahead in the competition. At a national level, CBDCs can help eliminate the corruption behind paper currency. Compared to some countries, India is quite late considering interoperability and scalability in this development, but ahead of some.

 

Q: Does India plans to introduce their blockchain?

It has yet to be public. However, it is in the pipeline. Ultimately, it’s a ledger system, and India is ahead in technology and development. Right now, RBI is looking at how we can have our blueprint, our ledger system. We can now take advantage of or improve our ecosystem, which is available now.

 

Q: Do the CBDCs have the potential to come up as one Asia currency, as we have in Europe?

Yes, it can happen. Even if not, there can be interoperability standards, like what IMF has asked all the countries to have an interoperability standard, where one CBDC can talk to another, the Indian CBDCs must know how to speak with Yuan CBDCs. It will take two-three years for the actual use cases to come up.