Traditional Indian financial institutions could face “competitive pressures” from blockchain-based platforms such as Ripple in areas such as cross-border payments from India (CCI), according to a new paper on blockchain technology and competition from consulting firm Ernst & Young (EY) for the competition commission.
“In theory, once blockchain applications have gone through the pilot and proof-of-concept phases, they are expected to compete with other systems / technologies that offer similar services that may not be based on blockchain technology,” they wrote Authors of the paper adding:
“This can already be seen to some extent in the financial services sector, where blockchain technology was first applied. An example could be the cross-border payments market, where traditional banks may have to compete with solutions like Ripple. “
The authors suggested that because Ripple is faster, cheaper, and more transparent, it could put “competitive pressures” on the traditional Indian banking system.
Blockchain payment company Ripple offers services in 55 countries, according to the company. In addition, the company has positioned its cryptocurrency XRP as a “neutral bridge” to link various central bank digital currencies, as outlined in a recently published white paper.
In the United States, Ripple recently became embroiled in a lawsuit filed by the Securities and Exchange Commission alleging that it violated securities laws by selling XRP to retail customers because regulators see it as collateral. In a recent statement published by the editors of the Wall Street Journal, the regulator was criticized for “posing a threat to currency developers and retail investors” and for “inconsistent” with its approach, as Bitcoin and Ether are exempt from the same rules.
“The market thinks they are similar. We think they’re similar, ”said David Schwartz, Chief Technology Officer of Ripple, earlier this month on CoinDesk TV about XRP and Bitcoin.
The EY paper authors noted that cryptocurrencies in India “have drawn a lot of attention in recent years, culminating in a recent inter-ministerial committee recommendation to ban the trading and holding of cryptocurrency”.
The Reserve Bank of India, the country’s central bank, banned domestic banks from “dealing with cryptocurrency companies and their exchanges” in 2018 and petitioned the Supreme Court to lift the ban. The court ruled against the RBI in March 2020, but Indian government officials continued to consider cracking down on cryptocurrencies.
Despite these legal steps, some Indian state governments have been working to implement blockchain technology for various applications, including real estate records and birth certificates, according to the paper. There have also been blockchain-based pilots and proofs of concept in sectors such as technology, healthcare and agriculture in the country.