CBDC, DeFi, Digital Money Innovation

On 12th Nov 2017, published this article as an appeal for the adoption of new technology innovation #cryptocurrency - "digital format for the store of value that can be exchanged through the electronic medium."

You all know that I am working actively in this blockchain technology domain for the last 4 years. Today I would like to discuss the #CBDCs Central bank digital currencies and #DeFi Decentralised Finance.

The Bank for International Settlements (BIS) published a report that said over 70% of the banks are exploring CBDC two years ago; they also provided this Venn diagram, "The money flower: A taxonomy of money" Take a closer look at the diagram. Central Bank Issued currency for retail is in the sweet spot. It is universally accessible, virtual currency and can move on a peer to peer digital network.

RBI confirmed that they are also exploring/evaluating the issuance of CBDC. The central bank can issue a digital currency for retail users that can unleash the creativity and innovation of the law-abiding Indian citizens, honest tax-payers, micro, small, and medium businesses owners who can make use of it for transactions of all kinds (buy, sell, invest, trade, etc.). Let me highlight some data to understand the money flow in the Indian banking system.

• NPCI UPI Statistics says that 4,31,181.89 Cr worth of transactions performed in Jan 2021
• RBI bank-wise volumes in ECS/NEFT/RTGS/MOBILE transactions Statistics says that 91,70,162.30 Cr value movement happened in Jan 2021
• RBI Jan 2021 Money Supply Statement says that currency with the public is 27,70,315 Cr
• According to Trading Economics global macro models and analysts' expectations, remittances in India are expected to be 14900.00 USD Million by the end of this quarter.

We can understand the demand for a robust, reliable, highly efficient, least expensive, and highly secure financial system from Indian citizens through these numbers. This is the right time to introduce CBDC to take the Indian economy to the next level with a superfast, supersecure, least transaction fee system. RBI's regulatory Sandbox must include blockchain-based digital assets and currency innovators to experiment in the controlled environment. I hope to see few blockchain startups in the next regulatory sandbox cohort.

Let us talk about the #DeFi Decentralized finance ecosystem in India.

• NSDL Statistics 2,08,96,069 active accounts holding 1,79,61,709 Cr worth of shares, 35,87,798 Cr worth of debt/bonds and 4,19,961 Cr of CP
• CDSL Statistics 3,04,09,585 active accounts holding 25,29,145.7 Cr worth of securities
• India's stock market is the world's 7th largest, with a $2.7 Tn market cap.

The next wave of fintech innovation after payments is happening in the securitized assets investment and trading domain. Our India based investors, traders expecting fair opportunities to participate in the global markets. Our ambitious Indian entrepreneurs expect options to list their financial instruments (stocks & bonds) in India and international exchanges.

We, blockchain technologists, know that tokenization of dematerialized assets is the best mechanism to make it available across markets for global investors to invest.

Let us look at the top 5 DeFi startups by market cap.

• Aave is an open-source and non-custodial protocol to earn interest on deposits and borrow assets with a variable or stable interest rate. It also enables ultra-short duration, uncollateralized flash loans designed to be integrated into other products and services. $6.2 Bn USD market cap
• Uniswap is a decentralized exchange built on Ethereum that utilizes an automated market-making system rather than a traditional order-book. Instead of matching individual buy and sell orders, users can pool together two assets that are then traded against, with the price determined based on the ratio between the two. USD 5.8Bn market cap
• Maker is a peer-to-contract lending platform enabling over-collateralized loans by locking Ether in a smart contract and minting Dai, a stable coin pegged to the US dollar. Dai's stability is achieved through a dynamic system of collateralized debt positions, autonomous feedback mechanisms, and incentives for external actors. Once generated, Dai can be freely sent to others, used as payments for goods and services, or held as long term savings. $2.54 Bn USD market cap
• Synthetix is a token for minting synthetic assets on the Synthetix Network, built on Ethereum. $2.36 Bn USD market cap
• Terra is an algorithmically-governed, seigniorage share style stablecoin platform to which a collection of fiat-pegged tokens and stabilizing crypto assets, Luna, are native $2.18 Bn USD market cap.

You will note that financial creativity, innovation, and engineering are at an all-time high with the power of algorithms, smart-contracts, distributed ledgers, autonomous organizations built on the decentralized blockchain network. The digital assets global trade appears to achieve the 5 trillion dollar mark sooner than the Indian economy achieving the $5 trillion target.

These observations tell us the global investors' interest in digital assets trading. As a country with 40k startups working on innovative solutions for the world, we can create enormous wealth for India-based and global investors through the open & regulated digital assets markets & exchanges.

I leave it to the reader's perception, How important or urgent is the legal framework for the well-being of the digital startup ecosystem and their contribution to our country's economy.

Thanks for your four mins taken to read until this point. Please do share your comments and feedback.