Government agencies should move beyond looking at blockchain technology as a buzzword prone to overuse, or simply as a data storage mechanism. Cryptocurrencies based on blockchain technology may be a threat to the sovereign government’s control on money supply and monetary policy, but there are several advantages with the technology that can be harnessed creatively by the State to solve a few of its problems.
NFTs (non-fungible tokens) represent a variation of cryptocurrencies in the sense that these are not swappable. For example, bitcoins are fungible tokens, i.e. a bitcoin is not different from another bitcoin and is interchangeable. But NFTs are identified uniquely. This is why digital art pieces are now sold as NFTs on blockchains, which guarantees their authenticity. In simpler words, anybody can have a digital copy of the Mona Lisa, but the original and authentic Mona Lisa will be with the owner of its NFT. This amazing potential of NFTs to ensure authenticity is being utilized by many private entities. In August, Coca-Cola garnered more than $570,000 in its first-ever NFT collectibles auction. People have spent more than $230 million trading digital collectibles of NBA highlights. In India, too, it won’t be long before we see cricket NFTs and Bollywood NFTs, which may monetize, say, a clip of Mahendra Singh Dhoni’s winning shot in an IPL match, or a particularly suspenseful scene from a movie, such as Kattappa’s killing of Amarendra Baahubali in Baahubali-1. It is this monetization potential of the NFTs that presents the first opportunity for the government.
NFTs for funding museums: Creating NFTs for the artefacts in museums can be a significant source of funding for museums in the country. To put things in perspective, the budget overlay for museums in 2021-22 was ₹108 crore and another ₹293 crore through supporting autonomous bodies, whereas the global NFT market clocked more than $2.5 billion sales volume within the first half of this year.
Each museum has its own treasure trove of artefacts, whose digital identity can be created through NFT. Each digitized artefact can be put up for sale without any rights on the actual artefact in the museum. What the purchaser would get is the authentic NFT of a museum artefact. For example, if an NFT of the Mohenjo-daro dancing girl is created and is on sale on a blockchain medium, it is bound to get interest from history aficionados.
The ownership of the NFT is maintained on the blockchain such that no dispute can arise, and even better, every time the NFT changes hands, the government can get the platform commission on the sale value, making it a continuous stream of funding. To be clear, the government does not lose ownership of the physical artefacts, it is only the digital NFT version of it that is changing hands.
NFTs for municipal finance: Various municipalities in India have raised money through municipal bonds (or Munis), but many have been met with varying degree of lack of interest from the public. Lack of credit rating, and doubts over the repayment ability are some issues resulting in lower investor confidence. NFTs present an opportunity here. Municipal corporations may not have creditworthiness, but make up for it in assets, and cultural value of historic buildings. They can build a collection of NFTs for historic landmarks and put it up for auction on the blockchain. Each buyer will have a piece of the history of the city. Not just landmarks, infrastructure projects such as a park or a flyover can also be digitally represented and be made into NFTs for the local citizenry to bid. Not only will such an auction augment resources of the State, but also build a much more participatory governance where citizens feel they own the part of the city.
Though there are differing views about the regulation of cryptocurrencies, the underlying technology of blockchain seems to be acceptable, as is evident in RBI bulletins, and recommendations of the inter-disciplinary committee. Various government agencies have identified use cases for blockchain. The ministry of electronics and information technology had released a draft national strategy on blockchain. The government think tank NITI Aayog, too, released a report, Blockchain: The India Strategy, showcasing use cases ranging from land records to chit funds.
One thing is clear: being a revolutionary technology, blockchain cannot be stopped. An application of this technology such as the NFT, which presents a great opportunity to unlock value, should be readily welcomed by the government and used creatively.
Mahesh Singarapu is an Indian Revenue Service officer and deputy director in the Enforcement Directorate. Views are personal.
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