Technology Law

[By Yash Tiwari] The author is a student of Dr. Ram Manohar Lohiya National Law University, Lucknow.   Introduction: Asset Tokenisation One of the most exciting applications of blockchain technology is digital asset tokenization, which is the act of representing an asset’s ownership rights into digital tokens and storing them on a blockchain. Tokens can serve as digital certificates of ownership in these situations, representing nearly any kind of asset, including digital, physical, fungible, and non-fungible ones. Because assets are kept on a blockchain, owners are able to keep custody of them.  Through increased asset utility and composability, this approach has the potential to completely change the global financial landscape. Recognising the potential advantages of asset tokenization, regulators worldwide are putting effort into creating frameworks that would safeguard investors from harm while encouraging innovation and industry expansion. The article covers India’s early steps in asset tokenization. It highlights initiatives taken by entities like RBI, SEBI, and IFSCA. It also compares advanced global approaches and suggests a way forward for India.  Early Stages of Development in India India is only now starting to explore the world of asset tokenization, as the nation makes the first moves in utilising this innovative financial technology. Despite being in the early stages of development, India is showing signs of rising interest in incorporating tokenization and blockchain technology into its economic structure with these initiatives:  RBI-  Launched on November 1, 2022, the RBI’s wholesale Central Bank Digital Currency (CBDC) pilot project focuses more on technical testing than transaction volume as it explores asset, bond, and security tokenization, including customer-held fixed deposits. The Digital Rupee-Wholesale (e-W) program settles secondary market involving government securities. In addition, Peer-to-peer (P2P) & Peer-to-Merchant (P2M) transactions are covered by the RBI’s December 2022 retail CBDC trial, which promotes a CBDC ecosystem.  Deputy Governor T Rabi Sankar revealed during the 19th Banking Technology Conference that the RBI is considering the idea of tokenizing assets and government bonds, with a greater emphasis on technological testing than transaction volume.  SEBI’s Perspective on Security Tokens-  SEBI plans to regulate security tokens representing financial securities, promoting issuance and trading. Blockchains can democratize markets through fractional ownership. Fractional ownership is when the cost of an asset or property is split among individuals, each getting a share. It helps an individual co-own a high-value property with multiple investors. In its consultation paper titled “Regulatory Framework for Micro, Small and Medium REITs (MSM REITs),” released on May 12, 2023, SEBI addresses firms that facilitate fractional real estate ownership. In order to promote asset democratisation and market participation, SEBI established a legal framework for fractional real estate ownership at its 203rd board meeting on November 25, 2023.  International Financial Services Centres Authority (IFSCA)-  On September 12, 2023, the Indian government’s statutory authority, the International Financial Services Centres Authority (IFSCA), formed a committee to create asset tokenization regulations and assess the legality of smart contracts. Establishing a regulatory framework expressly for the tokenization of tangible, real-world assets is a major first for any authority.  GIFT City– The goal of Gift City’s Expert Committee on Asset Tokenization is to establish thorough rules for tokenizing both tangible and intangible assets, evaluate the validity of smart contracts, and provide a strong framework for managing risks associated with digital tokens. In order to ensure responsible use and integration within the Gift City framework, the committee will also investigate the role of digital custodians in the asset tokenization paradigm and develop operational guidelines to support their functions.  This broad scope emphasises the committee’s critical role in establishing Gift City’s asset tokenization regulations and operational framework. The usage of blockchain creation and tokenization of digital assets will be allowed in GIFT City, as approved by the IFSC Authority. Although real estate will be the main focus initially, comfort goods and precious metals are also planned.  Telangana Government-  The Telangana government created a Blockchain District with the goal of acting as a cooperative platform for the collaboration of industry and academia. The founding members of the Blockchain District are the Telangana government, IIIT-Hyderabad, Tech Mahindra, and the Centre for Development of Advanced Computing (CDAC). A Technical Guidance Note on Asset Tokenization has also been released by the Telangana government’s Department of Information Technology, Electronics, and Communications. The document details the technical nuances of tokenization, proposes standards, and outlines strategies for businesses or startups initiating asset tokenization.  Tokenization across key Jurisdictions While India has begun to explore asset tokenization, its progress remains in the early stages. In contrast, leading jurisdictions like Singapore, the United States, UAE, and Switzerland are actively shaping the tokenization landscape through their legislative efforts and collaborative projects.  In Singapore, the Monetary Authority of Singapore (MAS) examines the structure and features of a digital token, including its associated rights, to determine if it qualifies as a capital markets product under the Section 2(1) of the Securities and Futures Act. On June 27, 2024, MAS declared the expansion of programmes aimed at scaling asset tokenization for financial services. This involves collaborating with international trade associations and banking establishments to promote standard asset tokenization protocols in the domains of fixed income, foreign exchange, and asset & wealth management. Together with global financial institutions, MAS announced the successful conclusion of the Global Layer One (GL1) initiative’s first phase. The group also revealed plans to create market norms, rules, and guiding principles for the fundamental digital infrastructure that would support tokenized assets. Under Project Guardian, MAS has collaborated with 24 financial institutions to test out potential use cases for asset tokenization over the last two years.  When it comes to asset tokenization regulation, the US has adopted a more cautious stance. The regulatory oversight over the issuance or resale of tokens and digital assets classified as securities, is generally within the purview of the Securities Exchange Commission (SEC), although it has not released any official guidance on the subject. The regulator has been actively involved in negotiations with industry partners and has set up a sandbox environment for testing new tokenization

[By Tridha Gosain] The author is a student of DNLU Jabalpur.   Introduction As the world of business continues to grow and adapt over the years, maintaining governance and ensuring the transparency, security, and fairness of decision-making has remained an issue. As fundamental as conventional voting methods are to corporate democracy, they are becoming increasingly prone to vulnerabilities that include tampering, fraud, vote coercion, and voter anonymity. However, the emergence of quantum computation, and its somewhat mysterious foundations, has opened the door for the creation – quantum vote – a new kind of solution that can dramatically revolutionalize the very foundations of business voting, bringing in a new level of shareholder confidence and solidity.  In this article, the author looks at the possibilities of quantum voting in corporate governance and highlights aspects of transparency, security and fairness, which have remained a concern in most organizations. Incorporation of quantum mechanics principles such as superposition, entanglement, and no-cloning theorem will enable quantum voting to transform the authenticity and accuracy of the corporate voting systems.   This article examines how quantum voting offers robust encryption methods to protect against quantum-based hacking attempts, thereby safeguarding the integrity of corporate decision-making as quantum computing continues to evolve. Furthermore, the article also analyses how quantum voting has flexibility in guaranteeing the voters’ identity to prevent vote bribery and coercion while at the same time maintaining anonymity in the voting process.  Quantum Principles in Corporate Voting Quantum voting relies heavily on the principles of quantum mechanics, including superposition or Schrodinger’s cat and entanglement along with no-cloning. These quantum phenomena, previously confined to theoretical physics, now offer powerful tools for securing and verifying corporate voting processes.  Another benefit of this solution is that the act of quantum voting is inherently immune to hacking or attempts at tampering. Existing electronic voting technologies based on classical cryptography are at risk due to the emergence of quantum computing which can break even the most secure encryption schemes. Quantum voting, in contrast, builds its encryption scheme based on quantum mechanics, thus making it impossible for anyone to tamper with the integrity of corporate voting in the future.  Preserving Anonymity, Preventing Coercion Another significant characteristic of quantum voting stems from the need to protect voter anonymity while preventing vote-buying and coercion. The conventional approaches to voting fail to balance the two objectives of anonymity and prevention of coercion in the voting process because measures that ensure anonymity encourage coercion whereas measures that discourage coercion interfere with the voters’ anonymity.  Quantum voting then follows this process and conveniently sidesteps the aforementioned paradox by employing quantum entanglement and the no-cloning theorem. Quantum entanglement is a procedure wherein two or more particles become correlated in such a way that the quantum state cannot be expressed in terms of individual particle quantum states, even when large distances separate these particles. This property allows for secure communication channels. On the other hand, the no-cloning theorem shows that it is impossible to make an identical copy of an unknown quantum state. It ensures that quantum information cannot be copied or stolen perfectly and thus provides a foundation for secure voting protocols. These principles combined provide a system where the votes can be securely transmitted and verified without any breach of the privacy of the voter or manipulation of the votes. Due to the features of preventing the opening of citizens’ votes or transferring them to other voters, quantum voting protocols are incorruptible and guarantee anonymity since votes are encoded into quantum states that cannot be copied or deciphered.  Transparency and Verifiability Moreover, quantum voting protocols offer unparalleled transparency and verifiability, two crucial tenets of corporate governance. In contrast to classical voting systems, where the voter has no ability to assure the trustworthiness of the voting process besides relying on the trusted third party or a central authority, quantum voting systems utilize quantum mechanics principles for decentralized verification and consensus.  Using quantum entanglement and quantum key distribution, the stakeholders can confirm the accuracy of votes and the authenticity of the voting process without violating the anonymity of the votes or disclosing any other information. This kind of decentralization reduces the chances of central control or manipulation while at the same time promoting more trust and transparency in the corporate world.  Quantum Voting Rights: A Departure from Traditional Models In its basic form, Quantum Voting Rights (QVR) are defined as a set up in which some shareholders or some classes of shares have special rights in voting that are disproportionate to their actual economic rights. This divergence from the usual ‘one share, one vote’ principle is practiced by tech titans such as Google and Facebook. This has not only sparked controversy over the balance of power on who should control the companies where shares are traded but also over the rightful owner of those shares.  The rationale for QVR can, therefore, be traced back to conventional counterintuitive theories, which inform quantum mechanics – a sphere of physics where particles can occupy several states at once but do not conform to logical reasoning. The quantum phenomenon researchers have used these to come up with a new voting system that is more secure, verifiable and anonymous as compared to the other voting systems.  Navigating Regulatory and Legal Challenges in India The two most important forms of corporate governance regulations in India are the concept of shareholder democracy and inclusiveness of stakeholders. The adoption of Quantum Voting Rights (QVR) faces regulatory and legal hurdles due to the Companies Act, 2013, and the Securities and Exchange Board of India (SEBI) regulations, which prioritize equal voting rights and shareholder protection. But with the burgeoning startup environment in India and more foreign investors coming in, there is pressure to embrace advanced governance structures. While QVR represents a departure from traditional voting methods, it can be implemented in ways that uphold the core principles of corporate law. By integrating QVR systems with existing governance structures, maintaining transparency through robust disclosure requirements, and incorporating safeguards for minority shareholder protection,

[By Anupama Reddy Eleti] The author is a student of Gujarat National Law University.   Introduction  2023 has been a significant year for the Indian Data Privacy Landscape. From the passage of the Digital Personal Data Protection Act, 2023 in April to the recent release of the Draft Telecommunication Bill 2023, MIB and MeitY have rolled out several legislations reshaping India’s personal data use. Amidst these developments, the Broadcasting Services (Regulation) Bill, 2023 (Draft Bill) was released in early November to repeal the Cable Television Networks (Regulation) Act, 1995 (Cable TV Act), and provide a uniform legislation regulating all forms of broadcasting networks. However, like any other legislative effort, the possibilities of the Bill have been scrutinised, with Chapter III gathering the most attention. While the bill tries to retain key aspects of the Cable TV Act and associated Rules, Chapter III comes as a distinct new development.  Titled “Content Standards, Accessibility and Access Control Measures”, a cursory reading of the Chapter reveals clear parallels with Part III of the IT Rules which is presently facing scrutiny at the Apex Court.  Drawing parallels  The similarity in question is essentially Section 20 of the draft bill, which casts an obligation on certain online broadcasters to adhere to a programme code and advertisement code and notes, “Any person who broadcasts news and current affairs programs through an online paper, news portal, website, social media intermediary, or other similar medium but excluding publishers of newspapers and replica e-papers of such newspapers, as part of a systematic business, professional, or commercial activity shall adhere to the Programme Code and Advertisement code referred to in Section 19.” Further, Section 19 gives way for the introduction of a completely new Programme Code and Advertisement Code to be prescribed by the Central Government.   Parallelly, the IT Rules of 2021 showcase a previous attempt of the Ministries at introducing similar obligations. Rule 9(1) of the IT Rules introduced an obligation upon publishers of “news and current affairs” and “online curated content” to follow a code of ethics which consisted of the Norms of Journalistic Conduct of the Press Council of India and the Programme Code under the Cable TV Act.  However, specific provisions of the IT Rules were shortly set aside by the Bombay High Court in the case of Agij Promotion of Nineteenonea Media Pvt. Ltd. & Ors. vs. Union of India & Anr. Firstly, the court contended that they imposed obligations under a statutory framework that was alien to the Information Technology Act, 2000 (IT Act). The court pointed out that the two provisions referred to in the “Code of Ethics” i.e. the Norms of Journalistic Conduct of the Press Council of India and the Programme Code under Section 5 of the Cable Act, belong to independent legislative frameworks. The court questioned how these distinct legislations could be incorporated under the impugned rules of the IT Act and form the basis for substantive action in case of violation. Secondly, the court noted that such rules are contrary to the Rule-making powers conferred to the Central Government under Section 69A, Section 87(2)(z) and (zb) of the IT Act.   Furthermore, the court while commenting upon the obligations imposed by the Programme code noted that it exceeds the reasonable restrictions under the Fundamental right to speech and expression. In this regard, the bench noted, “ If a writer/editor/publisher has to adhere to or observe the Programme Code in toto, he would necessarily be precluded from criticising an individual in respect of his public life [see: Rule 6(1)(i)]. It is, therefore, quite possible that the writer/editor/publisher on contravention of the provisions of clause (1) of Rule 9 of 2021 Rules, but without even transgressing the boundaries set by clause (2) of Article 19 of the Constitution, may expose himself/itself to punishment/sanction under the 2021 Rules.” This reasoning highlights how inappropriately excessive it was to obligate such publishers to adhere to the Programme Code, meant for traditional cable TV network operators. Thereby, the current bill which repeats this obligation for news and current affairs broadcasters raises questions as to the constitutionality of the move. However, this is seemingly resolved by the inclusion of Section 19 in the Draft Bill which prescribes a new and differentiated programme and advertisement code for different broadcasters.   Global Comparision – Digital News Regulation  In a report by Oxford Pro Bono Publico, digital news content regulation was observed across seven different nations. The report indicated that media regulation in most countries struck a balance between press freedom and the delineation of publisher responsibilities. A common pattern of emerging legislation was seen, particularly in South American and European countries, where there was a prioritization of journalistic freedom and human rights in media regulation approaches. For instance, Argentina’s legislation, aligned with the American Convention on Human Rights, protects various forms of expression, especially political discourse, speech concerning public officials, public interest matters, and personal identity. Similarly, the Canadian Government emphasizes balancing its legislation with considerations for freedom of expression, privacy protections, and the open exchange of ideas and debate online.  In contrast, India’s Programme code under the Cable TV Act which was previously attempted to apply to news publishers was severely criticised for imposing excessive constraints. Not only was the code inappropriately applied, but it was also extremely broad in its sweep, including vague terms like ‘good taste’ and ‘decency’ which are inherently subjective. Further, the previously voluntary Journalistic Code of Conduct was exalted to the status of mandatory application under the IT Rules. The new bill retains the mandatory nature by making any violation of the codes subject to severe monetary penalties. This essentially introduces new statutory obligations in this domain. In this regard, it is recommended to align India’s new codes with global practices, with standards that are drafted with clarity and limited to manifestly illegal material.  Conclusion  The overall approach taken by MIB bypasses the reasoning of the Bombay High Court in its stay order. This it does by embedding the obligations within an independent