india: Time to reassess what is sweet, what’s dangerous and what’s ugly about India’s tech rules
India is among the most technology-adept nations, a function of its people’s comfort with IT products and services as well as its late-mover advantage. It must now engage with a spectrum of evolving needs around law and regulation. This is necessary to accelerate population-scale opportunities and address widespread risks.
Three sets of issues emerge here – understanding the nature of technology-linked risks, assessing the challenges to governance, and being imaginative in embracing new modes of regulation.
First, the risks, which themselves are creations of enhanced democratic access. In roughly two decades, India has added over a billion mobile phone subscribers, with over 50% of them now using smartphones. This is transformational and unprecedented. Improved access is credited with enabling financial inclusion, efficiency in education and healthcare, and fostering local ecommerce as well as global trade. However, a large user base is also a double-edged sword. As a result, corrective interventions need to be nimble and at digital velocity and population scale. Legacy regulation is simply ineffective.
An August 2021 Facebook report (bit.ly/3KD2ejA) found India to have a high rate of social media misinformation. This is partly attributed to its higher internet penetration rate, driven by smartphones. During June-July 2021 alone, Facebook received 1,504 user complaints in India, with a significant proportion of these related to bullying, harassment or sexually inappropriate content. Concerns are also emerging across other digital ecosystems, such as online gambling and crypto assets. The mobile phone is a communication device, a crime scene and also an unsafe personal space.
Several state-level laws regulate or entirely prohibit betting and gambling. However, research suggests India is among the top five countries, in terms of income potential from online gambling, and that the domestic online casino market may grow by 22% each year. Maharashtra, Telangana and Karnataka have the most frequent visitors to online gambling websites. The market for illegal betting and gambling in India is highly lucrative, with an estimated value of $150 billion.
Offshore gambling websites often channel black money, engage in illicit transactions and launder wealth through financial intermediaries. Their operators are invariably based outside India, which makes it difficult to enforce the writ of the state. Recent investigations have revealed instances of locals being hired to open bank accounts and trade through various online wallets, revealing gaps in due diligence mechanisms.
For the digital economy to flourish, it is important to evolve approaches that help resolve systemic and structural risks. It is time to reassess what is good, what is bad and what is ugly. Online gaming and online gambling must not be conflated. Similarly, blockchain and sensitive decentralized finance must not be clubbed with predatory crypto-gaming. If we don’t embrace disruptive technology markets through sensitive regulation, others will.
A failure to capitalize may see India lose key avenues for economic growth and investment. India’s risk environment will then be shaped by external jurisdictions, some intimate to the country.
By banning cryptocurrencies altogether, nations such as China have missed the bus. India must leverage its position as the world’s third-fastest growing technology hub and seize the opportunity created by Beijing’s command and control ethos that is antithetical to innovation.
Tech regulation at population scale is akin to writing a new constitution for a digital nation. What we need today is new thinking and a new imagination of the digital world as not merely a virtual extension of the real, but an entirely different paradigm. There needs to be a clear-eyed understanding of what is legal, what is illegal and what may be illegal and yet requires regulations to serve and protect users and citizens.
By taxing cryptocurrency assets but not recognizing these as legal tender, India has shown some welcome flexibility. It would do well to retain this nimbleness and become a co-curator of relatively safe tech platforms, services and products of the future that respond to Indian jurisdiction rather than offshore the production of risks along with the rewards.