{"id":7989,"date":"2021-08-26T09:41:14","date_gmt":"2021-08-26T09:41:14","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=7989"},"modified":"2021-08-26T09:41:16","modified_gmt":"2021-08-26T09:41:16","slug":"blockchain-technology-for-depositories","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/blockchain-technology-for-depositories\/","title":{"rendered":"Blockchain Technology for Depositories &#8211; SEBI&#8217;s New Guidelines"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The <strong><em>SEBI or Securities &amp; Exchange Board of India <\/em><\/strong>has asked depositories, TAI (Trustees Association of India), and Stock Exchanges to create, maintain, and host a system that uses <strong><em>DLT or Distributed Ledger Technology or <\/em><\/strong>Blockchain Technology for depositories, to monitor and record the creation of securities as well as to monitor the covenants of non-convertible securities. The system will come into action from 1<sup>st<\/sup> April 2022, but testing of the system will start from 1<sup>st<\/sup> January 2022. In this blog, we will discuss the SEBI\u2019s guidelines for the usage of Blockchain Technology for Depositories.<\/p>\n\n\n\n<p>Based\non the suggestions of various authorities &amp; other official bodies, SEBI has\nbeen instructed to implement the process for creating a platform that will be\nbeneficial for observing covenant supervising and for different security\npurposes for the depositories who will be using the SEBI\u2019s services.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a54f285f0bae\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a54f285f0bae\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/blockchain-technology-for-depositories\/#What_is_Blockchain_Technology\" title=\"What is\nBlockchain Technology?\">What is\nBlockchain Technology?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/blockchain-technology-for-depositories\/#What_is_Depository\" title=\"What is\nDepository?\">What is\nDepository?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/blockchain-technology-for-depositories\/#Background_of_Blockchain_Technology_for_Depositories_%E2%80%93_SEBIs_Guidelines\" title=\"Background of Blockchain Technology for Depositories \u2013 SEBI\u2019s Guidelines\">Background of Blockchain Technology for Depositories \u2013 SEBI\u2019s Guidelines<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/blockchain-technology-for-depositories\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_Blockchain_Technology\"><\/span>What is\nBlockchain Technology?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Before\nwe discuss the SEBI\u2019s guidelines for the usage of Blockchain Technology for\ndepositories, it\u2019s important to know the meaning of Blockchain Technology.\nBlockchain is mentioned as Distributed Ledger Technology, which makes the\nhistory of any digital asset unalterable and clears through the use of\ncryptographic &amp; decentralisation hashing.<\/p>\n\n\n\n<p>This technology is simply defined as a decentralised, distributed ledger that records the origin of a digital asset. By inherent design, the data on a blockchain is not able to be changed, which makes it a legal disruptor for industries such as cybersecurity, payments, and healthcare.<\/p>\n\n\n\n<p>According\nto the Hindustan Times report, the Indian Government has currently said that it\nhas used Blockchain Technology that is mostly used by cryptocurrencies, to certify\nIndian start-ups digitally. Blockchain Technology powered certificate verifying\nplatform has been created by the <strong><em>DPIIT (Department for Promotion of Industry\nand Internal Trade)<\/em><\/strong>. The platform will be capable of aiding the\nGovernment to disburse Rs. 10,000 crores from Fund of Funds for start-ups to\nprovide incentives to start-ups as well.<\/p>\n\n\n\n<p>In\nJuly 2021, it was observed that the Central Government is eyeing to create a\nblockchain platform that would aid the Government Departments, investors,\nbanks, and PSUs to confirm the authenticity of the information submitted by\nstart-ups in India. Previous reports have suggested that the Indian Government\nis looking to create a platform that would come up with the roadmap for\nregulations and the use of blockchain in India.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_Depository\"><\/span>What is\nDepository?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It\nrefers to a company or a place that holds financial securities in a\ndematerialised form. An organisation, bank or any institution holding &amp;\nhelping in security trading is referred to as a depository. The account of\ndepository holds securities in the same manner that bank accounts hold funds.<\/p>\n\n\n\n<p>A\ndepository can be a place also where something is held for protection or\nstorage. Hence, a depository can be an institution, a construction or a\nwarehouse that enables businesses and individuals to deposit any valuable asset\nfor protecting. TheThe money deposited in a depository is used for investing in\nsome other securities &amp; lending to other people or businesses; hence, for\nproviding liquidity in the exchange market. After understanding the meaning of\nBlockchain Technology and Depository, let&#8217;s understand the whole background of\nSEBI&#8217;s guidelines for the usage of Blockchain Technology for Depositories.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Background_of_Blockchain_Technology_for_Depositories_%E2%80%93_SEBIs_Guidelines\"><\/span>Background of Blockchain Technology for Depositories \u2013 SEBI\u2019s Guidelines<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>SEBI\nhas proposed the construction of platform security and covenant monitoring a\nsystem hosted by depositories as per the suggestions. Blockchain Technology for\ndepositories can be combined into various sectors. The primary use of this\ntechnology is as a distributed ledger for cryptocurrencies like bitcoin; there\nwere also some other operational products that had matured from proof of\nconcept by the end of 2016.<\/p>\n\n\n\n<p>Interest,\nasset cover &amp; covenants, security creation, redemption payment of credit\nrating information, non-convertible securities, and regularly monitoring or\nobserving security cover, covenants, and asset cover will be recorded by the\nsystem.<\/p>\n\n\n\n<p>Depositories\nshould provide secure login credentials to issuers, CRAs (Credit Rating\nAgencies), DTs (Debenture Trustees), and others for recording &amp; verifying\nnecessary information on the system and put in place enough protections to make\nsure the reliability &amp; security of the data on the system as per the\ndirective. They have also been told to exchange information with the other\ndepository for the objective of combining and maintaining a compatible system.<\/p>\n\n\n\n<p>Depositories\nwill also need to create an alert system that will be offered to stakeholders\nfor information submission, acceptance &amp; rejection, as well as\nnotifications for periodic &amp; event-based compliances.<\/p>\n\n\n\n<p>Moreover,\nif the issuer fails to inform the DT(s) of the status of interest payment or\nredemption amount, the DT(s) will have to inquire of the issuer or perform an\nindependent evaluation (from investors, banks, etc.) to determine the same.<\/p>\n\n\n\n<p>Based on such assessment, DT(s) shall update in the system the payment status of non-convertible securities within seven working days of interest payment becoming due to nine working days of the maturity or redemption date <strong>SEBI<\/strong><sup><a href=\"https:\/\/www.sebi.gov.in\/\" class=\"text-primary\"><strong>[1]<\/strong><\/a><\/sup> said.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>After discussing the SEBI\u2019s notification regarding the usage of Blockchain Technology for Depositories, it is cleared that it is necessary to create a blockchain-based platform to monitor and record the creation of securities as well as to monitor the covenants of non-convertible securities. The platform will be capable of aiding the Government to disburse Rs. 10,000 crores from Fund of Funds for start-ups to provide incentives to start-ups as well. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/how-to-differentiate-enterprise-value-and-equity-value\/\">How to Differentiate Enterprise Value and Equity Value? \u2013 An Overview<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The SEBI or Securities &amp; Exchange Board of India has asked depositories, TAI (Trustees Association of India), and Stock Exchanges to create, maintain, and host a system that uses DLT or Distributed Ledger Technology or Blockchain Technology for depositories, to monitor and record the creation of securities as well as to monitor the covenants of [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":7990,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[64],"tags":[827],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/7989"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=7989"}],"version-history":[{"count":6,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/7989\/revisions"}],"predecessor-version":[{"id":7996,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/7989\/revisions\/7996"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/7990"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=7989"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=7989"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=7989"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}