Essay: How is blockchain regulated in India?

1.INTRODUCTION
The financial sector is almost digital in India the banks are using finance and technology (here in after refer to Fintech ). All over the world a new currency is in the market that is Crypto currency. The technology behind the crypto currency or bitcoin  is blockchain technology. The financial sector is dealing with the money which have to be secure. As our Indian government is interested in blockchain but hates crypto currency. Blockchain reached far impact in the financial sector and the financial organization are investing for research and implementing of blockchain technology. According to RBI notification crypto currency in case of India is not legally recognized however transaction through crypto currency is not prohibited thus a user may use crypto currency on his own risk . Indian government is doing research to find out the feasibility of blockchain technology used  in crypto currency for mitigating the constants of financial sector. Therefore in future there is huge scope for use of block chain in financial transaction to make them more efficient, error free, regulated and consistent.
2.WHAT IS BLOCKCHAIN AND HOW IT WORKS
Blockchain is a trusted, shared and public transaction ledger, which everyone can inspect but which are not in controls of a single user.The Blockchain Technology uses the distributed ledger, cryptography and time stamping. Blockchain is distributed ledger system where transactions are stored as blocks which is equally shared with the node in a network and the transaction will be placed and verified in same real time. As the ledger grows the blocks in chain increases in size. Each transaction block before adding to chain it has to be verified by the network. That all the nodes connected to the network  has full information related to the transaction  in network. In blockchain technology cryptography ensure that the ledger is only modified by the owner with their private key necessary to file and copy of blocks is in sync with each nodes in a network.
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2.1 TYPE OF BLOCKCHAIN
The Block chain technology  can be specified in three types:-
2.1.1 Public Blockchain
The  Public blockchain as the name suggest it is by the people for the people to the people. In this type of blockchain no is incharge of it. This type of blockchain is transparent  and open anyone can view at real time  now the question came if no one is incharge how its decisions are taken. The decisions takes place by Proof-of-stake(Pos)  and Proof-of-work(Pof)  the decentralized consensus mechanism.
Example:- Bitcoin, Litecoin .
2.1.2 Private Blockchain
The Private blockchain itself says that it is any individual or organization private property. There is centralized organization  for modify  permission and read permission is available for public or restricted to some important resource (data base application, audit files). In other term  for verifying the transaction internally setting  up the group is private blockchain.
Example:- Multichain, BankChain .
2.1.3 Federated Or Consortium Blockchain
This type of blockchain operates under the group leadership. In this blockchain they don’t allows any person with internet access in the transaction verification process. The Federated blockchain is not only faster but is secure also. In banking sector it is mostly used. The selected sets of nodes controls the consensus process.
Example:- R3, EWF.
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2.2 Blockchain In The Indian Context
In 2017, State Bank of India came with a consortium blockchain technology “BANKCHAIN” in which 27 banks, IBM, Microsoft and KPMG are involved. For international trade finance and vendor financing Several mainstreams banks like ICICI Bank, Kotak Mahindra Bank, YES Bank and Axis Bank have used the technology. To help in understanding the implications of blockchain technology  the National Payments Corporation of India (NPCI) held an “ideathon ”.
3.BLOCKCHAIN TECHNOLOGY:CHALLENGES IN THE FINANCE SECTOR
Blockchain technology has high capacity and have its challenges too. In blockchain technology there are lot of problem and that can cause many problems in financial sector. The transactions are registered continuously, all the transaction are recorded and kept secret. There are some disadvantages in implementing blockchain
3.1 Cost of Initiation, Implementation, and Maintenance
For implement a blockchain system the initial cost is very high. Large input of hardware and software are require for initial launching. Considering the financial status the small bank and investment companies may not afford the cost. This will become a burden to use this system for making or recording transactions  to such companies. Cost of maintenance is also high.
3.2 Modifications of Data
There is also a problem in modification of the data. Regularly the banks and financial sector modify the stored data, especially the transaction data. In blockchain system such modifications in the form of difficulties, is more than liability in comparison to an asset for business. That’s by the financial organization reduces the recording of transaction. Considering In the financial sector the transaction  can be countless every day, recording of such transactions is a long process which cause delay, thus, the system can be inefficient.
3.3 Literacy Requirements
The blockchain system requires a high level computer knowledge. If the employee who don’t have knowledge or illiterate they cannot make proper modification in a system. Thus  literate employees are hired in companies. The companies basically educate their current employees   to avoid hiring of  any illiterate employee.
3.4 Duration of Blockchain
The transaction recorded in a system has no certainty how much it will  last for long time. The information about the past transaction is required in most of the financial transaction
If the period of such records is undecided, then it makes the system unsuccessful in the financial sector.
4. REGULATIONS OF BLOCKCHAIN
Blockchain is considering a lot of grip within India majorly in Bank, Insurance and Cards industry. The players are coming together in these industries, to make one association to realize the benefits of Blockchain at industry level. However, Some business groups have explicit interest for locating blockchain for improving your business processes Along with their supporters and business partners. In the area of supply chain financing , bill discounting, cross border payments , trade finance the usage of blockchain has been tested by number of financial organization or government bodies. The blockchain technology is mainly used in crypto currency like bitcoin and it is accepted by many countries and there is legal.
4.1  Regulation In India
There are many regulation for blockchain. For business such regulation are challenges. To save the time period or simplicity most of business prefers to use system that have few regulations. The implementation of blockchain system is discourage for the businesses because it has long procedure and regulations. Currently crypto currency exchanges does not regulate by the Indian government
Arun Jaitley, the finance minister of India  in his budget speech, said that “there is a real and heightened risk of investment bubble of the type seen in Ponzi schemes”
 He again said that to eliminate crypto-assets, measures will be taken in financial support for illegal activities.
 He also mentioned that the government will actively explore Blockchain technology to move forward in the digital economy.
 In India, promote the best practices of digital asset business a Self-regulatory body known as Digital Assets and Blockchain Foundation India  has been established to promote the best practices of digital asset business.
 Reserve Bank of India has issued a Notice to people about Virtual currency associate risk and has suggested that under India’s current legal framework  virtual currencies  are investigative.
 The Indian Supreme Court issued a notice to the Reserve Bank of India and other agencies to Respond the petition draft by Supreme Court
5. FRAUD DETECTION
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6.CONCLUSION
As the blockchain is helpful in detection of fraud in the financial sector the regulation of cryptocurrency in India is not legal because the crypto currency is not traceable and it can be used for many illegal activities and cause increase of corruption. There are some section under Indian Penal Code which may applicable on using virtual currency (Section463- Forgery, Section420- Cheating And Dishonestly Inducing Delivery Of Property, Section383 – Extortion)