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Blockchain technology has ‘huge potential to fight counterfeiting’

The Reserve Bank of India has relayed that the new cutting edge technology could be the answer to fighting a billion dollar counterfeiting industry and changing archaic payments systems.

In a report released by banking giant Goldman Sachs earlier this month, “What if I told you,” the bitcoin hype cycle has gone quiet, but the blockchain “could disrupt everything.”

Goldman Sachs“Potential use cases for the core technology Bitcoin abound. The VC backdrop is healthy and expectations are high, but roadblocks remain.”
— – Goldman Sachs

Visa Europe stated a similar opinion this year. “When 2015 arrived a lot of innovation chatter in Fintech focused on Bitcoin, but as we leave the year that focus has shifted substantially to the blockchain. If we think back to how it was perceived a year ago and then how it is understood today, it’s clear that another transformation is happening.”

This change of focus can also be seen in India. In December 2013, The Reserve Bank of India (RBI) cautioned users, holders and traders of virtual currencies about potential financial, operational, legal, customer protection and security-related risks.

The RBI recently released a further statement outlining that blockchain technology falls outside of today’s banking systems. "The traditional (and presently used) system works on the basis of ‘trust’ and the ‘regulatory’ and ‘controlling’ power of ‘central’ entities / counter parties. As against this, the ‘blockchain’ technology is based on a shared, secured and public ledger system, which is not controlled by any single (‘central’) user and is maintained collectively by all the participants in the system based on a set of generally agreed and strictly applied rules."

Reserve Bank of India logo"Regulators and authorities need to keep pace with developments as many of the world’s largest banks are said to be supporting a joint effort for setting up of ‘private blockchain’ and building an industry-wide platform for standardizing the use of the technology, which has the potential to transform the functioning of the back offices of banks, increase the speed and cost efficiency in payment systems and trade finance."
— – Reserve Bank of India

The most prominent of these joint effort is R3CEV. The New York based startup has hired specialists from Google, IBM, Barclays and Bitcoin. Having formed in September, the consortium now claims more than 40 of the world’s largest banks as participants, who are working on developing clear standards and protocols for distributed ledger systems.

While this pivot in focus appears to be the theme for the year, there are still many startups tackling issues from the ground up, using bitcoin outside of the banking system. The World Bank states that millions of Indian migrants send billions of dollars in remittance to their families or communities of origin. For many countries, this is an important source of family and national income.

In 2010, India’s remittance inflow was estimated to be US$55b, and the country was regarded as the world’s foremost remittance recipient. The Bank states that despite significant progress over the years, accessible, efficient and cost-effective remittance services are still in need of improvement.

The World Bank“Remittances transfers often can be costly relative to the low incomes of remitters and the small amounts involved, especially in rural India, and are not accessible.”
— – The World Bank

Unocoin is attempting to chip away at this issue. “When you send bitcoins to an email-id or another Unocoin user, there is no fee. When sending bitcoins to a bitcoin address, Unocoin collects 0.0001 btc that is deducted from your Unocoin balance which is paid to the network that is processing your transactions. There is no fee for receiving bitcoins on your Unocoin wallet.”

The RBI further states that the blockchain, “with its potential to fight counterfeiting,” may hold the key to protecting industries from an influx of fraudulent products.

One of the largest and oldest business chambers in India, The Federation of Indian Chambers of Commerce and Industry (FICCI), reports that the flood of counterfeit and pirated products creates a massive drain on the global economy, and deprives the Government of revenue vital to public services.

According to a recent report by the FICCI and one of the Big Four auditors KPMG, the counterfeit market has been increasing at 44 percent each year, which is faster than the speed of fast moving consumer goods.

"Counterfeit goods is a huge issue that needs to be addressed,” said Rajat Wahi, partner at KPMG. He added that the practice was "more prevalent in rural and semi- urban areas compared to urban areas."

India’s pharmaceutical industry recently discussed the issue at the Messe Frankfurt Trade Fair India, a two day conference which took place earlier this month. 144 attendees and 21 speakers discussed possible solutions to the US$4.25b fake drugs market. According to one professional, Dr Shailesh Iyenger MD, combating counterfeit in India is being considered a truly serious challenge.

Ajit Singh, Chairman of pharmaceutical products and services company, ACG Worldwide, added that counterfeiting is largely invisible and not much attention is being paid to the issue at hand.

Everledger is using the immutable ledger of bitcoin’s blockchain to tackle this issue. The UK based company, currently in beta, started by focusing on blood diamonds, but has expanded their services to include insurance companies and law enforcement. In the near future they plan to add services such as high-end luxury goods. “Our technology can be extended to track any asset that carries a Unique Identifier which is difficult to destroy or replace,” states the Everledger website.

The concept attracted the attention of  Barclay’s Bank earlier this year, and Everledger completed a 13 week accelerator programme run by the bank in London. Barclays was also one of the first to sign on with R3CEV.


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