Month: August 2021

Bombay HC Interim Order on IT Guidelines

Shabbir Chunawalla

There was a case against the new IT Rules pertaining to the code of ethics for publishers of online content. The Bombay HC stayed Rule 9(1) and Rule 9(3) of the IT (Guidelines for Intermediaries and Digital Media Ethics Code) Rules, 2021.

Rule 9(1) says a publisher shall observe and adhere to the code of ethics and norms of conduct for journalists under the Press Council guidelines and Cable TV Code.

Rule 9(3) sets out a 3-tier structure to deal with complaints against publishers. First tier is self-regulation by publishers. Second tier is by self-regulation through a body of publishers. Third tier is an oversight mechanism by Centre.

The HC is of the opinion that such compulsory adherence to code of ethics is in the breach of the right to free speech guaranteed under Article 19 of the Constitution.

As such, the HC says further, clause 9 goes beyond the scope of the IT Act itself.

The Court allowed clause 14 and 16 of the IT Rules that deal with the formation of an Interministerial Committee and blocking of content in certain situations.

The HC has not stayed Rule 9(2) which says the publishers who contravene or violate any other law can be proceeded against under the law.

Indian 5G Standards

Shabbir Chunawalla

5Gi are the Indian 5G standards. The 3GPP’s global standards govern 4G LTE networks operations worldwide. The International Telecom Union has suggested 5G standards. Telecoms in the US, Canada, Australia, Japan, South Korea, Germany, China, Russia and West Asia are among those countries which are rolling out 5G services based on 3GPP standard. If the standards are common, manufacturing is facilitated. It is therefore, important that Indian 5G standards should not be made mandatory. It should be considered optional and non-mandatory for the industry. If 5Gi standards are made compulsory, they would increase the price of smart phones.

Bitcoin and Volatility

Shabbir Chunawalla

Bitcoin and cryptos have solved the problem of uncertainty by having a fixed amount of currency in the market. However, the volatility in value remains an issue. Fiat currency’s value depend on economic fundamentals. Cryptos have value based on pure speculation. If cryptos get acceptance of the government, it plays a vital role in deciding the value. But how long cryptos can remain beholden to governments?

Crypto’s are the darling of investors. That has prompted as many as 83 countries to consider developing CBDCs, and they are at different stages of development.

Nations do not want cryptos to be used foe nefarious activities. An IPO has to satisfy several norms. However, an initial crypto offering called ICO can be launched by anyone. Most of these ICOs are fraudulent. The sound ICOs too dwindle in value.

However, there are good ICOs too which provide investment opportunities, especially to youngsters. It is a boom.

There has to be a balance between regulation that curbs innovation and unbridled expansion that leads to misuse.

Digital Advertising Shift

Shabbir Chunawalla

In digital advertising, there are two main contenders — search advertising on Google and social media advertising on Facebook, Twitter and Instagram. Since many years, Facebook has remained number 2 in the US digital ad sales. In June 2021, Apple introduced privacy changes on iPhones. This made Facebook advertising less effective. Brands started seeking alternatives. Amazon, a marketplace, emerged as an effective choice, and advertising started shifting to it from Facebook. It is too early to call this a trend. Users do search directly on Amazon, but many brands are reluctant to come on Amazon, as they fear losing a direct connection with customers. Even Amazon fears that ad clutter will alienate its clients. However, Amazon also realises that advertising has the potential to subsidise its low -margin e-commerce business.

Crypto Exchanges

Shabbir Chunawalla

As cryptos evolve all over the world and in India, there is a need for buying and selling of cryptos. In order to achieve this, we require crypto exchanges. This allow us to swap cryptos, say we can swap Bitcoins with Litecoins. We can make purchases of cryptos using fiat currency. Exchanges indicate the ruling market prices of cryptos. These exchanges also convert cryptos into regular fiat currency, which is credited in the account at the exchange or transferred to a normal bank account.

Indians have shown great interest in crypto investments. CoinSwitch Kuber is one crypto exchange to leverage this digital revolution. It is an institution that brings opportunities to the doors of not only the high-net-worth individuals but also to the common people.

Cryptos have a bull run after the SC lifted a blanket ban on them in 2020. And cryptos have been validated by global giants who made investments in them. Crypto transactions are made by these exchanges as simple as buying anything on e-commerce site. Most of crypto investors in India come from smaller towns and cities. They are young people below 28. They are not averse to taking risk.

Crypto exchanges interact with the government through channels like IAMAI and IndiaTech. They have data set to show to the authorities. They self-regulate themselves. They follow the guidelines by SEBI, PMLA and RBI. They follow KYC norms. They accept money from a white-listed bank account. They operate within blockchain model and fintech model. They monitor the transactions for fraud.

There are four big crypto exchanges in India. CoinDCX has become India’s first crypto unicorn. It has raised $90 million recently. It will double its manpower. CoinDCX was registered in Singapore in 2018. It has 3.5 million users. It wants to expand its user base to 50 million over the next few years. There could be many more crypto unicorns in India in the next few years.

WazirX, a cryptocurrency exchange, in India has shown massive growth. It has participation from smaller cities, especially, of women. It has 7.3 million users.

Wild West of Cryptocurrency

Shabbir Chunawalla

The US counterpart of India’s SEBI is called SEC — Securities and Exchange Commission. Its chairman has requested the Congress to vest the agency with more authority to monitor the trading, lending and platforms of cryptocurrency. He calls it the Wild West that is vulnerable to risk and fraud.

There are many tokens which may be unregistered securities. The prices are open to manipulation. The investors are at risk. More authority from the Congress would mean prevention of transactions, products and platforms falling among the regulatory cracks.

There is increasing investor interest in cryptocurrencies which have reached formidable capitalisation. Investors have in their portfolios digital tokens. However, we lack the oversight of the market.

There should be powers to oversee cryptocurrency exchanges. There should be oversight of crypto lending and peer-to-peer decentralised finance — DeFi. These allow crypto transactions without intermediation of traditional banks. In the absence of regulation, a lot of people may get hurt.

Blockchain Association is open to find workable solutions, and currently also complies with oversight by the state and federal bodies.

It is not fair to describe the crypto economy as the Wild West, as the crypto industry is not totally unregulated.

Google Facebook Deal

Shabbir Chunawalla

Two Massachusetts companies propose a class-action suit against Google for entering into an agreement with Facebook to drive ads to them and hinder competition, thus violating anti-trust law.

In online advertising, Google has retained its dominance by this deal with the Facebook. There are virtual auctions that determine whose ads appear where in programmatic buying. There is a header bidding system devised in 2014. It enables publishers to direct a user’s browser to solicit real-time bids from multiple exchanges. Such bids should not be restricted to Google’s exchange. Facebook adopted this system, but in 2018, it entered into a deal with Google. It agreed to limit its programme in return for preferential treatment in Google’s ad business. Google has thus restrained the competition through an agreement with Facebook.

The two companies claim that Google is responsible for all the damages advertisers suffer.

IoT in Manufacturing

Shabbir Chunawalla

There is automation in industry. It is an important aspect of Industry 4.0. Here the production operations are harmonised through communication between various entities in the manufacturing plant.

IoT is a key technology to make this happen. Manufacturing has been done horizontally, that takes care of several verticals. There is communication of the employees with the equipment. There is communication between the various machines. IoT improves efficiency and productivity in areas such as accident prevention, internal traffic and employee safety. All this was monitored manually. IoT brings visibility into these activities.

The other benefit is management of resources efficiently, say energy, water, gas and other resources. In IoT, there is analytics associated with hardware. On the software side of IoT, there is data collection, security, forecasting and predictive analysis.

In this field too, SaaS business model has become popular.

The manpower in the field is drawn from the field of hardware, software, data science and consultancy. IoT by itself is emerging as a new industry, and offers diverse job opportunities.

Central Bank Digital Currency : CBDC

Shabbir Chunawalla

RBI intends to introduce central bank digital currency (CBDC). It will facilitate digital payments. Just a cell phone and internet will enable a digital transaction. It is safe and convenient. The cost of printing and distribution of paper currency will be saved. It reduces the risk of back-end settlements. It will facilitate cross-border transactions.

A CBDC is primarily legal tender issued in a digital form. It should be distinguished from digital payment products supported by physical currency and private digital currencies such as Bitcoin. Some of the benefits of CBDC are already available in the UPI system.

Adoption of CBDC will depend on its design such as the interface with the intermediaries. It is to be seen whether CBDC tokens would be interest bearing. How CBDC would be converted into cash? What level of anonymity would be given by CBDC?

The issues to be settled are whether CBDC would be for retail or wholesale. It is to be seen whether CBDC would be account-based or token-based. It is to be seen whether commercial banks would be onboarding the consumers or the RBI. There should be a study as to how the private banks would be affected. Could it lead to the reduction of bank deposits? It affects lending and loan pricing.

There is scope for product development around the CBDC by fintech firms and other intermediaries.

CBDC will be a part of payment systems. It will supplement the use of cash (since it is not an alternative to cash). It is just another way of paying for products and services through a wallet. CBDC is one of the wallets available, with the difference that it is issued by the RBI.

In order to shift people from cash, CBDCs may pay interest. It may lead to erosion of bank deposits. If RBI adopts a decentralised model, it will not compete with banks.

It will not substitute cryptos, nor will it compete with it. RBI does not treat crypto as an asset, as it does not have future cash flows, and is volatile because of speculation.

The CBCDs can take off only after an appropriate legislation is passed in Parliament.

ML and AI in Influencer Marketing

Shabbir Chunawalla

ASCI launched guidelines for influencer marketing in June 2021 asking advertisers to demarcate clearly the promotional material so as to avoid the misleading of consumers. ASCI has started receiving complaints about the violation of the guidelines, mostly in the beauty and personal care products. On contact by ASCI, the influencer adds the disclosure label immediately.

ASCI intends to use AI-based technology platform to identify the violations. A French firm Reech uses this platform. ASCI has tied up with Reech to identify collaborative content which are not disclosed fully. They have search engines to identify lack of transparency.

Indian space still remains challenging. The number of influencers in India are far more. Thus there is more content from India on social media. In other words, the platform will have to take care of large data set and the algorithm will have to be primed correctly. Besides, there is the challenge of multiple languages in India.

Several influencers are India based but address the Indian diaspora abroad. And there are influencers who stay abroad but address the Indian audience. Thus data can help ASCI to determine this.