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NSDL Launches BlockChain-Based Platform For Covenant Monitoring

The DLT platform, created by NSDL and SEBI, will facilitate monitoring of security and governance in the corporate bonds market

Finance Minister Nirmala Sitharaman flagged anonymity as an inherent risk with the blockchain technology

SEBI Chairperson Madhabi Puri Buch highlighted the benefits of the technology but raised concern about its anonymity aspect

The National Securities Depository Ltd (NSDL) on Saturday (May7) launched a blockchain-based or Distributed Ledger Technology (DLT) platform for security and covenant monitoring. 

The DLT platform, created by NSDL and SEBI, will facilitate the monitoring of security and governance in the corporate bonds market. It will further bring discipline and transparency to the market. 

SEBI Chairperson Madhabi Puri Buch launched the platform in the presence of Union Finance Minister Nirmala Sitharaman.

Speaking on the occasion, Buch said, “Today, we have noticed that in respect of market, securities, investment, and payments, people are increasingly placing their trust in distributed ledger technology.”

She highlighted transparency and real-time nature as some of the key characteristics of DLT because of which they are becoming popular.

Transparency and the real-time nature of the technology help people see all the information that is recorded on the blockchain platform, she said, adding that the technology also permits  infinite divisibility which can break digital assets, currency, or any form of information into smaller pieces and can help in financial inclusion. 

Talking about the cost effectiveness of the technology, the SEBI chairperson expressed scepticism.  While a lot of people call DLT to be cost effective, she said, the technology is not strictly cost effective in its current manifestation. “If the cost effectiveness arrives then it will be one more attractive feature of the entire DLT technology,” she added.

However, Buch also raised concern about the anonymity of the technology. “This (anonymity) is the single biggest differentiator between private DLT manifestations and what we commonly refer to as Central Bank Digital Currencies where it is not envisaged that this aspect of the technology would… be put to use as we don’t wish to have anonymity,” she said.

The finance minister also flagged anonymity as an inherent risk with blockchain technology.

The NSDL, which was set up in August 1996, is an Indian central securities depository based in Mumbai. It is India’s first electronic securities depository with national coverage. 

With the launch of DLT, NSDL claims to have established a robust framework for blockchain technology to transform the corporate bond market with enhanced digitisation. 

Growing Blockchain Market Of India 

As per an Inc42 report, there were over 350 blockchain startups in India in 2021. The report also found that blockchain could contribute as much as $62.2 Bn to the Indian economy by 2030.

In 2021, blockchain startups in the country collectively raised over $247 Mn in VC funds. The government also announced the plans to launch a fiat cryptocurrency in the Budget this year. 

The blockchain sector in the country has been witnessing a lot of interest, and a slew of deals have taken place recently.  Earlier this week, climatetech startup Creduce Technologies announced the launch of its sustainability-focused blockchain token, KICHEE. The token will likely be launched on May 31, while its pre-launch sale will commence on May 10. 

In February this year, Binance-owned crypto exchange WazirX cofounder and CEO Nischal Shetty, along with the US-based blockchain architect Omar Syed, launched a new Layer-1 blockchain called Shardeum.

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