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Indian state governments spur blockchain adoption in public administration

Numerous initiatives by local and state governments in India — from data management systems to verifiable certificate issuances — currently use blockchain…



Numerous initiatives by local and state governments in India — from data management systems to verifiable certificate issuances — currently use blockchain technology.

Ever since Bitcoin (BTC) popularized blockchain technology worldwide, the tech has found its way into myriad processes, from finance to public administration.

What started as a flex statement for early adopters has now become a way of revamping legacy systems and improving immutability, transparency and decentralization.

Despite its proven real-world use cases, most government agencies continue to take a cautious approach to adopting and infusing blockchain into their paper-based processes, given its predominant link to the cryptocurrency ecosystem.

However, a change of heart is underway as emerging economies see blockchain as a rare opportunity to establish a trust-based system for society.

While still reluctant to legitimize cryptocurrencies fully, India has generally accepted blockchain technology.

Numerous initiatives by local and state governments in India — ranging from data management systems to verifiable certificate issuances — currently use blockchain technology at their core.

India’s expedited blockchain adoption is supported by an active developer and startup community, which builds custom solutions to tackle specific use cases.

Cointelegraph’s pursuit to decipher India’s affinity for blockchain led to a conversation with Ankur Rakhi Sinha, the co-founder and CEO of Airchains, a Web3 startup focused on a middleware software-as-a-service (SaaS) platform.

Speaking to Cointelegraph, Ankur explained India’s massive appetite for blockchain and how elected leaders have been driving the change.

Cointelegraph: What is the primary driver behind India’s blockchain adoption spree?

Ankur Rakhi Sinha: The driving force behind India’s blockchain adoption is the multitude of benefits it offers to enterprises and institutions. Within their ecosystems, organizations recognize the immense benefits of incorporating blockchain technology. It addresses various challenges at different levels, such as enhancing transparency, traceability and establishing trust.

These factors contribute to the growing interest and widespread adoption of blockchain within India.

India is one of the fastest-growing blockchain markets globally, with over 56% of Indian businesses reporting an inclination toward adopting blockchain technology. With a developer base of a whopping 10 million, the Indian talent pool has been recognized globally by leading Web3 firms with the aim of fostering Web3 innovation and growth.

CT: In your discussions with the government agencies, are there any talks of crypto adoption?

ARS: No, currently, regulatory clearances surrounding cryptocurrency adoption are still uncertain. However, government agencies are actively exploring various avenues and seeking improved regulations. They are open to the idea and are diligently working toward creating a conducive environment for cryptocurrency adoption.

CT: Can you share any data and/or use cases that show improvements from older systems?

ARS: Yes, our recent collaboration with the New Town Kolkata Development Authority (NKDA) showcases the real-life adoption of blockchain. With a vast expanse of 27,000 acres of land and a staggering 50,000 NFTs [nonfungible tokens] representing one million ownerships, the NKDA’s adoption of NFTs for land mutation [the transfer of property titles] has revolutionized the traditional approach, and these initiatives demonstrate the growing recognition and commitment to harnessing the potential of blockchain to drive innovation and efficiency across various sectors.

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CT: Is India betting big on blockchain? Are there any government initiatives that help drive this cause?

ARS: Yes, India is definitely betting big on blockchain. Various government agencies and bodies within India are actively seeking to collaborate with blockchain solutions. While there is yet to be a high-level blockchain initiative from the government of India thus far, there is a strong demand from government entities that Airchains is actively addressing. One of the profound use cases of blockchain adoption includes the remarkable first-ever NFT-based land mutation in India.

Additionally, in January 2020, NITI Aayog’s two-part report titled “Blockchain: The India Strategy” made it apparent that while regulations regarding cryptocurrencies and other digital assets are under consideration, the government is significantly aware of the promise of core blockchain technology to transform various systems. 

Several Indian government bodies are supportive of blockchain technology adoption and have collaborated with Airchains to incorporate novel blockchain-based systems ensuring accountability and security. The Raigarh District Authority has collaborated with us to create a blockchain-based tree plantation monitoring system for the betterment of CSR [corporate social responsibility] initiatives, whereas the Firozabad Police Department worked with us to create a blockchain complaint management system to prevent tampering of reports.

CT: What type of understanding do Indian officials have about blockchain and associated tech?

ARS: Indian government agencies, state governments and bureaucrats possess a profound understanding of blockchain and Web3 technologies. They are well-versed in the latest developments and trends within the blockchain space, including liquidity, private chains and zero-knowledge rollups. [...] Their comprehension of blockchain extends beyond surface-level knowledge, as many officials have in-depth insights into how the technology functions. While some officials contemplate how blockchain should ideally operate, others are actively exploring ways to leverage this technology to address their unique challenges.

CT: What is the role of blockchain in India’s overall growth?

ARS: Blockchain technology is poised to play a huge role in India’s future growth, propelling the nation to a prominent position on the global stage. The increasing number of developers, enterprises and institutional use cases emerging in India underscores the significant growth potential of blockchain in the country. As blockchain adoption continues to expand, it is expected to drive innovation, foster economic development and create new opportunities across various sectors.

Another key push to India’s growth has been the entry of various global Web3 players into the Indian developer market. India is home to 450+ Web3 startups and has received over $1.5 billion in investments between 2021 and 2022, according to a 2022 NASSCOM Indian Web3 Landscape Analysis report.

Additionally, the report also highlighted that 11% of global Web3 talent is in India, making it third worldwide. Blockchain in India has the potential to contribute significantly due to the vast developer talent and the active Web3 community present in the country.

CT: We have seen numerous instances of state-wide blockchain implementations over the past three years. Are there any nationwide implementations of blockchain in India or any such plans for the future?

ARS: Yes, there have been significant discussions at various levels regarding nationwide blockchain implementations in India. For instance, organizations such as the National Payments Corporation of India and the Unified Payments Interface are exploring the potential of blockchain technology and conducting tests. Public sector banks are also actively experimenting with blockchain to determine how they can harness its capabilities.

These initiatives indicate a strong likelihood of nationwide blockchain use cases emerging in the near future. Airchains recently executed a state-wise use case with NKDA, and we are currently working on multiple state-level use cases that have the potential to impact the nation as a whole.

CT: How do you convince a government body to accept a new system?

ARS: Government [...] bodies are actively interested in adopting blockchain solutions to address their specific challenges. However, they emphasize the importance of operating within regulatory frameworks. Demonstrating transparency, efficiency and improved outcomes is key to gaining government support in the development journey.

CT: Which countries are ahead of India when it comes to wide-scale blockchain adoption? What measures must a country take to expedite blockchain adoption?

ARS: There are several countries in Central America that are actively pursuing wide-scale blockchain adoption within their ecosystems. India, being a large nation, is actively striving to accelerate the adoption of blockchain technology through numerous use cases. The country has established itself as a center of excellence in blockchain, with multiple agencies exploring various applications.

To expedite progress, implementing clear regulations is crucial. This includes defining guidelines for blockchain implementation and determining permissible use cases, which will facilitate faster execution and broader adoption.

CT: Can home-grown blockchain technology be used in off-shore use cases?

ARS: Many projects originating from India, such as Polygon and various layer-1 and layer-2 solutions, have gained global recognition. Airchains has also successfully collaborated with government agencies globally, including in Central America and Europe. Currently, there are several offshore projects in the pipeline for Airchains, scheduled to be completed within the next six to seven months. Utilizing home-grown blockchain technology for offshore use cases is indeed a goal being pursued.

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CT: How does funding work? What are your investors looking for?

ARS: Investors primarily seek scalability and feasibility in blockchain adoption, among other key factors. Funding in the blockchain space typically involves investors who believe in the potential of the technology and its ability to bring about transformative changes.

CT: What is your advice to fellow blockchain entrepreneurs in India?

ARS: My advice [...] is to focus on building a wide range of use cases and driving blockchain adoption to a higher scale. By creating innovative solutions and demonstrating the real-world benefits of blockchain technology, we can accelerate its adoption and drive positive change in various industries.

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SEC initiates legal action against FTX’s auditor

The SEC alleges that Prager Metis, an accounting firm engaged by bankrupt crypto exchange FTX in 2021, committed hundreds of violations related to auditor…



The SEC alleges that Prager Metis, an accounting firm engaged by bankrupt crypto exchange FTX in 2021, committed hundreds of violations related to auditor independence.

The United States Securities and Exchange Commission (SEC) has commenced legal proceedings against an accounting firm that had provided services to cryptocurrency exchange FTX before its bankruptcy declaration.

According to a Sept. 29 statement, the SEC alleged that accounting firm Prager Metis provided auditing services to its clients without maintaining the necessary independence as it continued to offer accounting services. This practice is prohibited under the auditor independence framework.

Extract from the SEC's September 29 statement. Source: SEC

To prevent conflicts of interest, accounting and audit tasks must be kept clearly separate. However, the SEC claims that these entwined activities spanned over a period of approximately three years:

“As alleged in our complaint, over a period of nearly three years, Prager’s audits, reviews, and exams fell short of these fundamental principles. Our complaint is an important reminder that auditor independence is crucial to investor protection.”

While the statement doesn't explicitly mention FTX or any other clients, it does emphasize that there were allegedly "hundreds" of auditor independence violations throughout the three-year period.

Furthermore, a previous court filing pointed out that the FTX Group engaged Metis to audit FTX US and FTX at some point in 2021. Subsequently, FTX declared bankruptcy in November 2022. 

The filing alleged that since former FTX CEO Sam Bankman-Fried publicly announced previous FTX audit results, Metis should have recognized that its work would be used by FTX to bolster public trust.

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Concerns were previously reported about the material presented in FTX audit reports.

On Jan. 25, current FTX CEO John J. Ray III told a bankruptcy court that he had “substantial concerns as to the information presented in these audited financial statements.”

Furthermore, Senators Elizabeth Warren and Ron Wyden raised concerns about Prager Metis' impartiality. They argued that it functioned as an advocate for the crypto industry.

Meanwhile, a law firm that provided services to FTX has come under scrutiny in recent times.

In a Sept. 21 court filing, plaintiffs allege that U.S. based law firm, Fenwick & West, should be held partially liable for FTX's collapse because it reportedly exceeded the norm when it came to its service offerings to the exchange.

However, Fenwick & West asserts that it cannot be held accountable for a client's misconduct as long as its actions remain within the bounds of the client's representation.

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DOJ readies witnesses in Bankman-Fried trial, highlights FTX asset management

The DOJ intends to highlight the experiences of retail and institutional clients who entrusted substantial assets to FTX.
The Department…



The DOJ intends to highlight the experiences of retail and institutional clients who entrusted substantial assets to FTX.

The Department of Justice (DOJ) has confirmed its intention to summon former FTX clients, investors and staff as witnesses in the upcoming trial involving Sam Bankman-Fried, the former FTX CEO.

The DOJ submitted a letter motion in limine on Sept. 30 describing the witnesses it intends to call concerning FTX’s treatment of customer assets.

The testimonies intend to provide perspectives on the interactions between the accused and the witnesses. It also aims to get the witnesses’ understanding of Bankman-Fried’s remarks and conduct, particularly regarding FTX’s asset management. The DOJ intends to highlight the experiences of retail and institutional clients who entrusted substantial assets to FTX, believing that the platform would safeguard them securely.

Court filing in the United States District Court for the Southern District of New York. Source: CourtListener

Furthermore, a situation has emerged concerning one of the DOJ’s witnesses, “FTX Customer-1,” who resides in Ukraine. Given the ongoing conflict in Ukraine, traveling to the U.S. to provide testimony is associated with difficulties. The DOJ has suggested using video conferencing as a viable alternative. However, Bankman-Fried’s defense has not yet approved this proposal.

Nonetheless, the legal team representing Bankman-Fried, led by lawyer Mark Cohen, has voiced concerns about the jury questions put forth by the DOJ. According to Bankman-Fried’s defense, these interrogations insinuate guilt on Bankman-Fried’s part, potentially undermining the principle of “innocent until proven guilty.“

Additionally, the defense contends that these inquiries may not effectively uncover the jurors’ inherent biases, especially related to their encounters with cryptocurrencies. Moreover, specific questions could inadvertently guide the jury’s perspective instead of eliciting authentic insights, possibly compromising the trial’s impartiality.

Related: Sam Bankman-Fried’s lawyer challenges US gov’t proposed jury questions

With the jury selection scheduled to start on Oct. 3, closely followed by the trial, the spotlight is firmly on this high-stakes legal confrontation. This case underscores not only its immediate consequences but also underscores the vital importance of transparent communication and unbiased questioning in upholding the principles of justice.

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Vitalik Buterin voices concerns over DAOs approving ETH staking pool operators

The Ethereum co-founder proposes a solution that could lower the likelihood of any individual liquid staking provider growing to a point where it poses…



The Ethereum co-founder proposes a solution that could lower the likelihood of any individual liquid staking provider growing to a point where it poses a systemic risk.

Vitalik Buterin, the co-founder of Ethereum, has expressed worries regarding decentralized autonomous organizations (DAOs) exerting a monopoly over the selection of node operators in liquidity staking pools.

In a September 30 blog post, Buterin issues a warning that as staking pools adopt the DAO approach for governance over node operators—who are ultimately responsible for the pool's funds—it can expose them to potential risks from malicious actors.

“With the DAO approach, if a single such staking token dominates, that leads to a single, potentially attackable governance gadget controlling a very large portion of all Ethereum validators.”

Buterin highlights the liquid staking provider Lido (LDO) as an example with a DAO that validates node operators. However, he emphasizes that relying on just one layer of protection may prove insufficient:

“To the credit of protocols like Lido, they have implemented safeguards against this, but one layer of defense may not be enough,” he noted.

ETH staked by category chart. Source: Vitalik Buterin

Meanwhile, he explains that Rocket Pool offers the opportunity for anyone to become a node operator by placing an 8 Ether (ETH) deposit, which, at the time of this publication, is equivalent to approximately $13,406.

However, he notes this comes with its risks. "The Rocket Pool approach allows attackers to 51% attack the network, and force users to pay most of the costs," he stated.

On the other hand, Buterin highlights that having a mechanism to ascertain who can act as the underlying node operators is an inevitable necessity:

"It can't be unrestricted, because then attackers would join and amplify their attacks with users' funds."

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Buterin further outlines that a possible approach to address this issue involves encouraging ecosystem participants to utilize a variety of liquid staking providers. 

He clarifies this would decrease the likelihood of any one provider becoming excessively large and posing a systemic risk.

“In the longer term, however, this is an unstable equilibrium, and there is peril in relying too much on moralistic pressure to solve problems," he stated.

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