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NSDL along with SEBI introduced DLT for security and covenant monitoring

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May, 11 2022

May, 11 2022

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On Saturday, National Securities Depository (NSDL), officially introduced a blockchain-based Distributed Ledger Technology (DLT) platform for security and covenant monitoring. The launch was done during the 25th-anniversary presentation of NSDL.

DLT platform was launched by NSDL along with the Securities and Exchange Board of India (SEBI). In the presence of Union Finance Minister Nirmala Sitharaman, SEBI Chairperson Madhabi Puri Buch introduced the platform. Now all the data of NSDL will be cryptographically signed, time-stamped, and added to the ledger which was previously stored in centralized databases. The two nodes NSDL and CDSL Central Depository Services Ltd. which is a SEBA division, will maintain and control the network. There will be a chance that other entities can join the network and establish their nodes in the future as per Buch.

According to NSDL, the launch of DLT has established a robust framework for blockchain technology to transform the corporate bond market with enhanced digitization. DLT platform will strengthen the monitoring of security and governance in the corporate bonds market to bring “further discipline and transparency to the market.” 

According to SEBI chairperson Madhabi Puri Buch blockchain transparency and real-time nature as some of the key characteristics of DLT for which technology became popular. She further explained that people can see all the information that is recorded on the blockchain platform because of transparency and the real-time nature of the technology. Additionally, technology also permits infinite divisibility which can break digital assets, currency, or any form of information into smaller pieces and can help in financial inclusion. But because of its current cost-effectiveness, it is not welcomed highly by Indian authorities. She said, “This is the single biggest differentiator between private DLT manifestations and what we commonly refer to as Central Bank Digital Currencies where it is not envisaged that this aspect of the technology would be put to use as we don’t wish to have anonymity.” 

The finance minister also raised concern about anonymity as an inherent risk of the blockchain technology which is the single biggest differentiator between private DLT manifestations and is commonly referred to as Central Bank Digital Currencies. 

According to a directive issued by the Indian Ministry of Electronics and Information Technology on April 28, crypto exchanges, virtual private network service providers (VPNs), and data centers are required to store user data for up to five years.

About NSDL :

In August 1996 the NSDL was set up hence it is India’s oldest depository. It is an Indian central securities depository that is based in Mumbai. It is India’s first electronic securities depository with national coverage. It controls 89% of the country’s securities market. Due to the new 30% crypto tax rule that became effective on April 1, trading volumes on top Indian crypto exchanges have declined by 70%.

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Indrani bose

CBW - External Analyst


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