The TCCCP Regulations, 2018 and Blockchain Technology

Crypto currencies and Blockchain technology have once again come into the lime light with a panel report recommending punitive measures for the use of crypto currencies. According to media reports, the panel, created by the Ministry of Electronics and Information Technology, the Securities and Exchange Board of India, and the Reserve Bank of India, found that there was serious concern with the “mushrooming of crypto-currencies almost invariably issued abroad and numerous people in India investing in these....All these crypto currencies have been created by non-sovereigns,”

Be that as it may, the Report is however, quite optimistic on the use of Block chain technology and its (already obvious !!) utility in the growth and development of the financial sector. To quote the recommendations of the Report:

"1. The Committee recommends that the RBI examine the utility of using DLT based systems for enabling faster and more secure payment infrastructure, especially for cross-border payments.

2. The Committee recommends that blockchain based systems may be considered by MEITY for building a low-cost KYC system that reduces the need for duplication of KYC requirements for individuals.

3. The Committee is of the opinion that DLT - based systems can be used by banks and other financial firms for processes such as loan-issuance tracking, collateral management, fraud detection and claims management in insurance, and reconciliation systems in the securities market. The Committee therefore recommends that financial sector regulators examine the uses of DLT in processes that can be incorporated by banks, insurance companies, securities exchanges etc. in their functioning.

4. The Committee recommends that SEBI may evaluate use of DLT for IPOs and FPOs as an alternative to present system of issuances. The Committee also recommends that SEBI may examine whether the depository systems can move to DLT based system.

5. Similarly, DLT can be beneficial for removing errors and frauds in land markets if the technology is implemented for maintaining land records. The Committee therefore recommends that various state governments may examine the feasibility of using DLT for land-records management.

6. The Committee is of the view that DLT may be leveraged to improve the existing e-stamping system for the purposes of collection of stamp duty.

7. The Committee is of the opinion that data localisation requirements proposed in the draft Data Protection Bill may need to be applied carefully, including with respect to the storage of critical personal data so as to ensure that there is no adverse impact on Indian firms and Indian consumers who may stand to benefit from DLT-based services."

This Report is dated 28 the February, 2019 and has only recently been made public. Sad to say, it has come late to the dinner table, because happy surprise !! INDIA ALREADY HAS A LAW WHICH RECOGNISES AND ENCOURAGES DIGITAL LEDGER TECHNOLOGY !! Please give it up for the THE TELECOM COMMERCIAL COMMUNICATIONS CUSTOMER PREFERENCE REGULATIONS, 2018. (19th July, 2018, though got notified in the official gazette a few months later.)

Regulation 2(w) defines “Distributed Ledger Technologies (DLT)” as "a set of technological solutions that enables a single, sequenced, standardized and cryptographically-secured record of activities to be safely distributed to, and acted upon, by a network of varied participants and their (i)database can be spread across multiple sites or institutions; (ii) records are stored one after the other in a continuous ledger and can only be added when the participants reach a consensus"

A.k.a., Blockchain.

You even have a definition of “Smart contract” (Regulation 2(bk)) being "a functionality of intelligent and programmable code which can execute pre-determined commands or business rules set to pre-check regulatory compliance without further human intervention and suitable for DLT system to create a digital agreement, with cryptographic certainty that the agreement has been honored in the ledgers, databases or accounts of all parties to the agreement."

In fact, Regulation 13 mandates Access Providers to adopt Distributed Ledger Technology (DLT) with permissioned and private DLT networks for implementation of the system, functions and processes as prescribed in Code(s) of Practice to ensure that all necessary regulatory pre-checks are carried out for sending Commercial Communication and to operate smart contracts among entities for effectively controlling the flow of Commercial Communications.

The Regulations are lengthy and comprehensive, but to summarise, The Telecom Regulatory Authority of India (T.R.A.I.) has acknowledged and recognises the utility of DLT to tackle the menace of unsolicited commercial communications, and has more importantly, expressly directed its implementation via secondary legislation.

The benefits of DLT in the telecommunications sector are multiple. For the purpose of UCC, implementing block chain technologies can help with the recording of complaints and can provide sharing of complaint related data, history of complainant, and history of persons or entities against whom a complaint is made easily accessible. Scrubbing will be easier and more effective. A DLT system could also be designed to have the capability to swiftly and automatically throttle the usage of or suspend or remove the defaulting entity from the UCC system. In fact, if all goes well, it could actually create a market for Scrubbing Services using DLT.

Granted, there are still a few hurdles to cross. Block chain technologies are currently extremely energy intensive, which entails significant costs. Also, a "permissioned" DLT system is not actually a DLT in spirit, since you still have a central point of control, but it was beyond imagination to expect that regulators would simply choose to adopt block chain technologies in full. A truly decentralised DLT would negate the need of a regulator, which other than not being feasible, is maybe not even desirable. What is heartening to see is an attempt by the regulator to warm up to a new technology which is here to stay and use it to the advantage of the consumer instead of being the usual cave man regulator running behind the times.