The Telecom Regulatory Authority of India (TRAI) issued the Telecom Consumers Protection (Twelfth Amendment) Regulations, 2024 and the Telecommunication Tariff (Seventieth Amendment) Order, 2024, available on TRAI's website. These amendments follow a consultation paper released on July 26, 2024, and an Open House Discussion held on October 21, 2024. The salient features of the regulations are:

1. To mandate separate Special Tariff Voucher (STV) for Voice & SMS to give consumers an option to pay for the services they require in general and to provide benefit to certain segments of consumers especially the elderly persons and those living in rural areas;

2. the cap on validity period for STV and Combo Vouchers (CV) has been increased from existing ninety (90) days to three hundred and sixty-five (365) days for the benefit of consumers;

3. Colour coding of vouchers as it exists in the physical form has been done away with in view of the prominence of online re-charges;

4. The reserving of denomination of ₹10/- and multiple thereof only for top-up voucher has been done away with, while retaining mandate of at least one Top Up voucher of denomination of ₹10/- provided by TTO (50th amendment) Order 2012.

The move is expected to help around 150 million 2G users and those who have two SIM cards, with one being kept exclusively for voice calls and SMS.

• Google offers to loosen search deals in US antitrust case remedy

Google proposed loosening its agreements with Apple and other partners to address a U.S. ruling that found it unlawfully dominates online search. The proposal suggests making its distribution agreements non-exclusive and, for Android manufacturers, unbundling the Google Play Store from Chrome and search. Google also proposed allowing browser developers that set its search engine as the default to reconsider that choice annually. The company argued that these measures are a balanced alternative to the government's more drastic suggestion of forcing Google to sell its Chrome browser, which it claims could stifle innovation in a rapidly evolving AI-driven market.

• Japan’s antitrust watchdog to find Google violated law in search case, Nikkei reports

Japan's competition watchdog, the Japan Fair Trade Commission (JFTC), is set to find Google guilty of violating antitrust laws, potentially issuing a cease-and-desist order to stop its monopolistic practices in web search services. The investigation, launched last October, follows similar antitrust actions in Europe and other regions concerning Google's market power, particularly its role in advertising through the widely used Chrome browser. This development adds to the growing global scrutiny of Google's practices, with the U.S. Department of Justice advocating for Google to divest Chrome.

• EU privacy regulator fines Meta 251 million euros for 2018 breach

The European Union's Data Protection Commission (DPC) fined Meta €251 million ($263.5 million) for a 2018 Facebook security breach that exposed 29 million users' data by exploiting a vulnerability in the "View As" feature. The DPC, based in Ireland, oversees compliance for major U.S. tech firms operating in the EU under the General Data Protection Regulation (GDPR). Meta, which has faced nearly €3 billion in GDPR fines, including a record €1.2 billion fine in 2023 currently under appeal, announced plans to appeal this latest decision as well. The company stated it promptly addressed the issue, informed affected users and the DPC, and has implemented extensive measures to enhance platform security.

• Polish e-commerce Allegro's unit sues Alphabet

Ceneo, a subsidiary of Polish e-commerce platform Allegro, filed a lawsuit against Google and its parent company Alphabet seeking 2.33 billion zlotys ($567.6 million) in damages, alleging losses from Google prioritizing its own price comparison service in search results. Ceneo claims these practices harmed its business and are tied to the $2.7 billion EU antitrust fine imposed on Google for leveraging its dominant search engine position to disadvantage smaller European rivals. The damages sought include 1.72 billion zlotys for losses, 615 million zlotys in interest payments from 2013 to 2024, and statutory interest from the filing date until payment. Google has disputed the claims, highlighting its long-standing support for shopping services across Europe.

• 18 OTT platforms blocked in 2024

The Indian government has blocked 18 over-the-top (OTT) platforms due to their involvement in hosting and distributing obscene, vulgar, and pornographic content, as per the provisions of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021. Minister of State for Information and Broadcasting, L. Murugan, announced this action in Parliament, emphasizing the government’s zero-tolerance approach toward such material. The Rules also provide for a Code of Ethics for publishers of news and current affairs on digital media and publishers of online curated content (OTT platforms).

Indian Cyber Crime Coordination Centre (I4C) provided data on cybercrime that Indian citizens lost Rs 120.3 crore through digital arrest scams, Rs 1,420.48 crore to trading scams, Rs 222.58 crore in investment scams, and Rs 13.23 crore in romance scams. The Indian Prime minister raised the issue in his recent ‘Mann ki baat’ episode. Digital arrest sees fraudsters claiming to be officers of an investigative government agency or law enforcement like CBI, Narcotics, RBI, TRAI, customs and tax officials. They approach the intended target using audio or video calls to first intimidate people and then extort money from them while confining them in one location — most usually the victim's own home — under the false pretense of an 'arrest'.

-        Report suggest that Google to develop AI that takes over computers

Google is developing artificial intelligence technology that takes over a web browser to complete tasks such as research and shopping, The Information reported on Saturday. Google is set to demonstrate the product code-named Project Jarvis as soon as December with the release of its next flagship Gemini large language model, the report added, citing people with direct knowledge of the product. This product is designed to take over routine tasks for users, like searching for information, booking flights, or buying products online. This type of AI, known as a “computer-using agent,” is part of a bigger trend. Other companies, like Microsoft, Apple, and OpenAI, are also working on similar tools. The development is significant as it may add to already existing Google hegemony and control over the digital space which has come under scrutiny in recent times

- The Indian government launched 1000 Cr startup funds for space technology

Indian government approved the establishment of a Rs.1,000 crore Venture Capital (VC) Fund dedicated to supporting India’s space sector. This pioneering initiative, developed under the aegis of IN-SPACe (Indian National Space Promotion and Authorization Center), aims to propel the growth of space startups, strengthen India’s space economy, and position the country as a global leader in space technology. The establishment of this fund is to promote innovation, economic growth, and self-reliance in high-tech industries. The Rs. 1,000 crore VC Fund is structured to align with India’s strategic vision for the space sector and supports the goals set forth in the 2020 space reforms. The fund is designed to address the unique needs of private companies operating in the high-risk, high-reward field of space technology.

-        HarmonyOS Next: China's Huawei Unveils New OS, Marking Official Break From Android

In a key development, China's Huawei has taken a key step toward breaking itself from the Google digital ecosystem. They have launched their own mobile OS. Huawei has officially started the public beta testing of the HarmonyOS Next for its devices powered by Kirin and Kunpeng chips in China. The operating system is said to bring new home and lock screen customisation options, faster animations and app launch speeds, and AI-powered features. The key to success will be the mobile apps to run on the platform. In this regard, Huawei claimed that at the time of its announcement, over 15,000 HarmonyOS native applications and meta-services were also launched. This is a very credible number, however, very miniscule in comparison to millions of apps present on the playstore. The development is interesting as the US has already put several sanctions on Huawei and see them as a threat of national security. On the other hand, digital entrepreneurs are watching the development closely as if the OS succeeds it may emerge as an alternative to Google ecosystem.

Read about the Indian startup ecosystem welcoming the recent initiation of a performance review of the Competition Commission of India (CCI) by the Ministry of Corporate Affairs (MCA)

https://www.business-standard.com/companies/start-ups/indian-startup-ecosystem-welcomes-mca-s-performance-review-of-cci-124021201346_1.html

ONDC records 5.5 million transactions in December 2023

December 2023 saw more than 5.5 million transactions through the Open Network for Digital Commerce (ONDC), the most in a single month since the platform's inception.

In January 2023, ONDC had 2,000 orders.

Of the total transactions in December 2023, 3.4 million (63%) were in the mobility category while 2 million (37%) were in the retail category.

Food and beverages category made up 32.5% of orders in the retail segment, followed by fashion (29.6%). The remaining transactions were divided among other categories, including groceries (10.1%), electronics (5.7%), home and kitchen (12.6%), beauty and personal care (8.5%), and groceries (10.1%). The biggest single-day orders that ONDC has ever received were roughly 217,000.

By the end of March 2024, the network hopes to have facilitated 6.5 million to 7 million transactions.

By the end of the year, ONDC targets to have up to 8 million monthly transactions. A peak of over 95,000 retail orders in a single day has already been observed.

The network also aims to reach a gross merchandise value of $48 billion and increase the e-commerce penetration in the country by 25% during the next two years. There are currently roughly 40,000 sellers on the network, distributed throughout 200 cities.

UPI transactions crossed 100-billion mark in 2023, marking an overall 50% increase from 2022

According to data from the National Payments Corporation of India (NPCI), the total number of transactions performed through the Unified Payments Interface (UPI) surpassed the 100 billion last year, marking a new milestone.

In 2023, UPI processed 117.6 billion transactions in total. Additionally, data indicated that previous year, the UPI rails processed a little over Rs 182 lakh crore in total value across the payments infrastructure.

In December 2023, the number of UPI transactions in the nation reached 12.02 billion, with the payments worth Rs 18.23 lakh crore being processed by the service. This indicated an annual 54% increase in volume and a 42% increase in transaction value.

This growth demonstrates the remarkable expansion of the nation's UPI payments service, which had around 74 billion transactions in 2022 and 38.7 billion in 2021.

Furthermore, according to NPCI’s data, there was a 49% increase in monthly UPI transactions from January to December of last year.

The National Payments Corporation of India (NPCI)'s recurring payment mechanism, known as UPI Autopay, has been gaining traction as well. It is mostly used throughout the nation for bill and subscription payments.

The growing amount of use cases that UPI Autopay may be applied to, could potentially be the reason for its growing popularity. This includes paying national credit card bills, insurance premiums, and mutual fund bills.

Additionally, the UPI Autopay feature has grown in terms of volume and value as a result of the recent changes to transaction limits, which were raised from Rs 15,000 to Rs 1 lakh.

Government of India may amend IT Act to accommodate new rules for AI, GenAI models

The Government of India is anticipated to revise the Information Technology (IT) Rules, 2021, and enact regulations governing generative AI models and artificial intelligence (AI) businesses.

It is anticipated that the revisions will require platforms that train their machines using artificial intelligence algorithms or language models to ensure that they are free from any type of "bias."

The Ministry of Electronics and Information Technology (MeitY), Government of India, is expected to announce the revisions soon. They require that AI algorithms and language models that are trained on datasets that contain prejudices or that have biases built into them be prohibited from being released for public use.

As mentioned by a high ranking government official, the parameters that now define bias include, but are not limited to, caste, religion, community, and national security. Platforms will be required by law to make sure that all of these guidelines are followed, broadening the scope of online safety and trust.

In order to assure safety, they will consult on parameters other than the ones that are currently known and understood to minimise prejudice. Another official stated that before the product is released into the market, these AI models must go through stress and sandbox testing to make sure that such biases are absent.

The IT Rules revisions may introduce new regulations around deepfake and synthetic content, in addition to providing safeguards against bias in AI and language models and clear guidelines for platforms on loan apps.

The decision of the GoI to amend the IT Act, 2021, to include such provisions, could be due to the fact that the Digital India Bill, which was supposed to have provisions that seek to empower users to seek algorithmic accountability from internet intermediaries and social media companies, is still some time away from being finalised. The fact that developments around generative AI is developing rapidly, cannot be ignored.

CBDC payments hit RBI goal of 1 million transactions in a day

On December 27, 2023, the number of central bank digital currency transactions surpassed one million for the first time, and it has since peaked at more than 2 million a day.

Although the e-rupee initiative, or CBDC, is still in the experimental stage, the RBI had set a goal of a million transactions per day for 2023, which they managed to achieve.

Prior to starting the retail e-rupee pilot, the RBI had started with wholesale CBDC in the government securities market and had recently expanded it to the call money market.

There is no timeframe for finishing the pilot, according to Governor Shaktikanta Das and his deputies, and the trial's learnings would be incorporated into the final design.

The use of digital payments through UPI and other tools has increased rapidly in India since the high currency notes were demonetised in November 2016. The RBI is attempting to position e-rupee as an additional payment option in response to users' inquiries about the necessity of switching from the current electronic payment options to CBDC.

The e-rupee has been used by a few state-run banks to distribute employee benefits in recent weeks, which has contributed to an increase in transaction volume.

With a small group of clients, RBI had collaborated with SBI and IDFC First Bank initially, which was introduced in December 2022. Other banks were brought in after things settled, and as more customers were brought in, banks started to provide trial access more liberally.

The Alliance of Digital Indian Foundation (ADIF) is a policy think tank committed to fostering innovation and growth of digital startups in India. Stay informed on policy updates through a free subscription to ADIF blogs. Kindly share your feedback and comments with us at office@adif.in. Your insights are valuable to us

2023 has seen significant developments in the realm of tech policy, where the clash between cutting-edge advancements and ethical considerations have sparked debates that will shape our digital future. The decisions which will be made today regarding this, be it regarding the ethical implications of artificial intelligence, the cybersecurity concerns surrounding our increasingly interconnected world, or the delicate balance between privacy and data-driven progress, will have far-reaching consequences for individuals and industries alike.

Let us take a retrospective glance at the notable events and transformative developments in the digital markets and technology landscape, exploring their potential implications for the startup ecosystem.

1.       Developments with regards to Google Lagaan

Google faced a significant setback when the CCI imposed penalties for high in-app purchase commissions, challenging its market dominance. Despite Google's appeal to the NCLAT, the tribunal rejected the stay application and mandated a 10% penalty deposit. Google initially sought the Hon'ble Supreme Court's intervention but withdrew its appeal in April. The Delhi High Court's groundbreaking statement mentioning that there is no impediment for the CCI to accept ADIF's urgent hearing application, enabled the CCI's oral hearing, leading to a Contravention Order in May 2023. This initiated an inquiry into Google's compliance, with the CCI posing nine questions. While the final hearing is set for January, this year's events underscore a shift in favour of India's startup ecosystem in the ongoing battle against big tech dominance.

2.       Developments on Google Android Bundling case

October 2022 also saw Google being handed a penalty of INR 1337 Crores along with remedial directions by the CCI in relation to the issue of app bundling in Android OS. Even though Google had filed an appellate application with the NCLAT in January this year, the NCLAT upheld most of the remedies prescribed by the CCI for Google, along with the total penalty amount. The matter now rests with the Hon’ble Supreme Court of India, and a final hearing will take place early next year. This marks a significant chapter in the ongoing dispute, marking the potential beginning of the end of dominance by big techs and ushering in a new era of progress for startups.

3.       Digital Personal Data Protection Act, 2023

In 2016, the Puttaswamy judgment stated that Privacy is a fundamental right. Since then, several iterations of data protection bill have been presented, but year 2023 stands as a significant milestone in the evolution of data protection laws due to the enactment of the Digital Personal Data Protection Act (DPDPA). The DPDPA introduces clarity and relaxes localisation norms, addressing long-standing concerns in the digital data landscape. However, despite this crucial legislative progress, the comprehensive implementation of the DPDPA awaits the formulation and release of guiding Rules. These Rules are anticipated to provide detailed frameworks and procedures, ensuring a seamless and effective application of the DPDPA's provisions. For startups, the yet-to-be-released Rules highlight the constant interplay between evolving regulations and the practical challenges of ensuring data protection in the digital era. The year 2024 holds a promising future for startups as robust privacy measures foster innovation and trust in the digital landscape.

4.       Open Network for Digital Commerce (ONDC)

The launch of the Open Network for Digital Commerce (ONDC) takes center stage as a transformative initiative in India. ONDC aims to democratize e-commerce access for millions of sellers, particularly those in small towns and rural areas, with the goal of maximizing e-retail penetration. This signifies a crucial moment, not just in reshaping the e-commerce landscape, but also in promoting collaborative growth for startups through scalable and cost-effective solutions. ONDC emerges as a symbol of inclusive digital commerce, leaving a lasting impact on the technological and entrepreneurial landscape of the year.

In November 2023, ONDC showcased robust growth with over 6.3 million transactions in 600+ cities. The network boasts 2.3 Lakh+ active sellers and service providers spanning 500+ cities, supported by 59 live Network Participants. Notably, 3000 Farmer Producer Organisations and 400 Self-Help Groups, micro-entrepreneurs, and social enterprises have integrated into the ONDC network. An exciting development includes ONDC's inaugural export pilot, with Singapore becoming the first market to procure products from Indian sellers through the network.

5.       Telecommunications Act, 2023

The Telecommunications Act, 2023, emerges as a crucial development, replacing archaic laws and embracing a forward-looking approach. Noteworthy for excluding OTT providers from the telecom services authorization regime, the bill modernizes spectrum allocation and enhances user protection. This transformative legislation signifies India's commitment to technological progress and regulatory resilience. Overall, it sets the stage for a dynamic era in the telecom sector, addressing contemporary challenges and fostering innovation.

6.       The proposed Digital India Act and regulation of new technologies

AI stands as a promising technology revolutionizing industries by automating processes, making informed decisions, and unlocking unprecedented levels of efficiency. Its ability to analyze vast datasets and adapt to dynamic scenarios positions AI as a transformative force with far-reaching implications for innovation and problem-solving. The much awaited/anticipated Digital India bill will address a spectrum of emerging cybercrimes such as unauthorized information sharing, deepfakes, and cyberbullying. It intends to place a strong emphasis on protecting children by regulating addictive technology, enforcing age-gating, and safeguarding their data on social media platforms. The proposed bill will be introducing a "do not track" requirement for businesses targeting children and will extend its regulatory reach to the gaming sector to mitigate online risks. Notably, the legislation will serve as a comprehensive framework encompassing a wide array of innovative technologies, including AI and the metaverse, ensuring their ethical use. This change in legislation is set to usher in a new era for responsible and ethical use of digital technologies. Overall, the proposed Digital India Act will play an instrumental role in enhancing online safety, privacy, and accountability in the ever-evolving digital landscape. Its draft is awaited in 2024.

As we stand at the cusp of 2024, the promises of enhanced privacy measures, ethical use of technology, and the burgeoning potential for startups signal a future where India continues to shape the global tech landscape. The resilience shown in regulatory evolution and the strides taken in technological progress pave the way for a digital era that is not only innovative but also values-driven and inclusive. The events of 2023 are not just a reflection of the present but a compass guiding us towards a promising and responsible digital future.

The Alliance of Digital Indian Foundation (ADIF) is a policy think tank committed to fostering innovation and growth of digital startups in India. Stay informed on policy updates through a free subscription to ADIF blogs. Kindly share your feedback and comments with us at office@adif.in. Your insights are valuable to us

POLICY

National e-commerce policy may be announced soon, is in its final stages

The Union Minister For Commerce and Industry, Government of India, Shri Piyush Goyal stated on Thursday, 28^th of December, 2023, that the planned National e-commerce policy being developed by the Government of India is nearing completion and will be unveiled very soon. The proposed regulation was the subject of an in-depth discussion back in August 2023 between representatives of e-commerce companies and a domestic traders' association, and it was hosted by the Department for Promotion of Industry and Internal Trade (DPIIT).

The government had already released two national e-commerce policy drafts previously.

The 2019 draft planned to address six main sectors of the e-commerce ecosystem, namely data, infrastructure development, e-commerce marketplaces, regulatory challenges, promoting the local digital economy, and export promotion through e-commerce.

Through a simplified regulatory framework for ease of doing business, adoption of contemporary technologies, integration of supply chains, and increased exports through this medium, the e-commerce policy seeks to prepare strategies for creating an environment that is favourable for the inclusive and harmonious growth of the e-commerce sector.

The National e-Commerce Policy's general framework aims to distinguish clearly between the marketplace and a warehousing-based model.

ONDC

CBDT clarifies the applicability of TDS liability for online retailers for orders placed on ONDC

On Thursday, the income tax authorities provided clarification regarding the TDS liability of online businesses using the ONDC. According to the FAQ released by the Central Board of Direct Taxes (CBDT), convenience, packaging, and shipping fees charged by e-commerce trading platforms for orders placed on ONDC shall be included in the gross sale amount and a 1% TDS will be deducted from it.

The Department for Promotion of Industry and Internal Trade (DPIIT) launched the ONDC as a new initiative, and due to that, the CBDT had received comments asking for clarification on who is responsible for complying with IT rules regarding Tax Deducted at Source (TDS).

As mandated by law, all e-commerce companies must deduct TDS at the rate of one percent on the total sales amount of products or services sold on their platform.

The CBDT has made it clear that when several e-commerce operators (ECOs) are using the ECO platform to complete a single transaction, the supplier side must complete the TDS compliance before the payment is released to the supplier.

CYBER RISKS

Cyber risks take the top spot as the biggest threat faced by Indian organizations

According to PwC's 2023 Global Risk Survey - India’s survey, cyber threats are the biggest concern that Indian organizations face, with 38% of respondents feeling highly or severely exposed to them. As a result, compared to 2022, cybersecurity has risen from number three to number one on the risk radar. 35% of business leaders in India are also very concerned about other digital and technological risks.

According to the results, 55% of the respondents want to invest in cybersecurity tools and AI, machine learning, and automation technologies in the next one to three years to address the difficulties faced by Indian companies.

71% of Indian organizations are collecting and analysing IT and cybersecurity data for risk management and opportunity identification to support these investments. 61% of businesses worldwide implement the same practice.

The report shows that not only are Indian business leaders showing a greater willingness to take risks, but they are also reasonably adept at identifying the opportunities that risks present.

Additionally, the survey revealed that 99% of Indian corporate executives are optimistic about their company's ability to successfully manage risk and balance growth.

When it comes to generative AI (GenAI), 69% of Indian executives view it as an opportunity, compared to 60% globally, indicating that Indian firms view technology disruptors as opportunities.

The report also showed how businesses are using cutting-edge technology like GenAI for risk management, with 48% of Indian businesses using AI and machine learning extensively for automated risk assessment and response.

AI REGULATIONS

Government of India issues advisory to social media platforms to comply with IT rules regarding deepfakes and misinformation

With a focus on deepfake technology-fuelled misinformation, the government on Tuesday sent out another advisory to all social media and internet intermediaries, including WhatsApp, Instagram, Facebook, and Google, urging strict adherence to the current IT regulations.

Shri Rajeev Chandrasekhar, Minister of State for Ministry of Electronics and Information Technology (MeitY), Government of India, stated that “a formal advisory has been issued incorporating the ‘agreed to’ procedures to ensure that users on these platforms do not violate the prohibited content in Rule 3(1) (b) and if such legal violations are noted or reported then the consequences under the law will follow.”

According to the IT Ministry, platforms were not adhering to the guidelines about content that was prohibited, concerning deepfakes and misinformation.

Hon’ble minister emphasized that the ministry will "closely observe" how social media and internet intermediaries are adhering to these guidelines over the coming weeks and will bring in changes to the IT Rules or legislation as needed.

All businesses have been required by the IT Ministry to provide an "action-taken-cum-status" within a week. The move to issue the advisory is the most recent in a string of letters and notifications that intermediaries have received requesting that they abide by the rules that forbid hosting, displaying, or disseminating specific types of content, such as images of child sexual abuse, pornographic material, or advertisements for unlicensed loan applications on their network.

Platforms are expected to take more steps to allow the promotion of illicit lending and gambling apps that have the potential to scam and mislead users. The advisory read that the intermediaries will have the sole responsibility for any consequences.

IT Ministry seeking inputs to build responsible AI

To create locally developed "tools and frameworks" that support the just and ethical development of artificial intelligence across themes like machine unlearning, synthetic data generation, fairness tools, bias mitigating strategies, and others, Government of India has invited proposals from academic institutions and research and development organizations.

According to the proposal paper, machine unlearning algorithms aid in the elimination of unwanted learned behaviours, which advances the creation of more precise, dependable, and equitable AI systems in a variety of fields.

The applications will be accepted from government-run establishments with pre-existing lab infrastructure, including workstations, servers, and other dedicated staff, such as the Indian Institute of Technology (IIT), the National Institute of Technology (NIT), Indian Institutes of Information Technology (IIIT), R&D, and private academic organizations.

However, these institutions must demonstrate that the project will be completed in the next two years and guarantee that it aligns with the main objective of encouraging the ethical and just application of AI. By January 12^th, 2024, the proposals must be submitted to the Ministry of Electronics and Information Technology (MeitY).

Meanwhile, Indian businesses are also gearing up for responsible AI adoption.

According to a report by the industry group NAASCOM, about 60% of businesses say that they have either started formal measures towards adopting such responsible practices or have already established Responsible AI (RAI) policies and practices. About 30% of respondents said they were only vaguely aware of the RAI imperatives and lacked a defined plan or structure.

Industry leaders are working extensively to invest in cutting-edge RAI technologies and methods while prioritizing openness in their AI activities due to the growing demand for RAI among AI users and stakeholders.

As Responsible AI adoption continues to evolve, large-scale implementation and adoption are contingent upon the resolution of multiple technical, commercial, and regulatory obstacles.

The largest obstacles to RAI adoption continue to be the lack of access to high-quality data and the shortage of qualified technical and management staff, even as businesses continue to focus on trust and transparency in the commercial development and use of AI and AI-enabled technologies.

The Alliance of Digital Indian Foundation (ADIF) is a policy think tank committed to fostering innovation and growth of digital startups in India. Stay informed on policy updates through a free subscription to ADIF blogs. Kindly share your feedback and comments with us at office@adif.in. Your insights are valuable to us

In the News:

On December 18, 2023, the Government of India presented the draft of The Telecommunications Bill, 2023 in the Lok Sabha. This proposed legislation was aimed at replacing outdated laws such as the Indian Telegraph Act (1885), Indian Wireless Telegraphy Act (1933), and The Telegraph Wire (Unlawful Possession) Act, 1950. The introduction of the Telecom Bill, 2023 occurred almost a year after the conclusion of consultations for its 2022 counterpart. On the 24^th of December 2023, the bill received the assent of the President and has now been enacted into law.

Background:

The Indian telecommunications sector has historically been governed by three laws:
1. Indian Telegraph Act, 1885
2. Indian Wireless Telegraphy Act, 1933
3. Telegraph Wires (Unlawful Possession) Act, 1950

The Government of India has recognized the need for a modern legal framework and over the last few years, has been working towards bringing in structural changes to the current regulatory mechanisms in the sector. The recent repeal of the Telegraph Wires (Unlawful Possession) Act (1950) in December 2023 marked a significant development. The Telecom Regulatory Authority of India (TRAI) Act (1997) established TRAI as the regulator, and the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) was created to handle disputes. The central government retains the authority to issue licenses.

Despite the evolution of communication technology since the Indian Telegraph Act (1885) came into effect, which originally regulated telegraph services, the outdated legislation continued to govern the telecommunications landscape. Efforts were made in the past, such as introduction of the Communication Convergence Bill in 2001 and the draft Indian Telecommunications Bill, 2020. The latest initiative, The Telecommunications Act, 2023, aims to replace existing telegraph laws, and establish a contemporary regulatory framework for the dynamic telecommunications sector.

Main Features of the Telecommunications Bill, 2023:

Ø  Telecom related Authorization: Approval from the central government is mandatory for telecommunication services, network expansion, or radio equipment possession. Existing licenses are valid for their duration or up to five years.

Ø  Spectrum Allocation: Auctions are the usual method, except for specific purposes like national security and public broadcasting, where administrative allocation applies. The government can reassign frequency ranges, and spectrum sharing, trading, leasing, or surrendering is permitted.

Ø  Interception and Search Authority: The legislation allows the interception or blocking of messages for public safety, emergencies, and specific reasons like state security. Telecom services can be suspended, and temporary possession of telecom infrastructure is allowed in public emergencies.

Ø  Protection of Users from Spam calls: Measures for user safety include requirement of mandatory prior consent to be taken by companies from subscribers for specific messages, including advertising messages, establishing ‘Do Not Disturb’ registers, and enabling user reporting mechanisms for malware or undesired messages. Telecom providers must maintain an online grievance redressal system.

Ø  Right of Way: Entities installing telecom infrastructure can request fair and non-exclusive right of way over public or private property. It is an excellent provision that will smoothen the network roll out

Ø  TRAI Appointments: Amendments in the TRAI Act permit individuals with 30 years of experience for the Chairperson role and 25 years for members.

Ø  Widening the scope of USO Fund as Digital Bharat Nidhi: The bill, renames the Universal Service Obligation Fund as Digital Bharat Nidhi, broadening its scope to include telecom research and development.

Ø  Rationalizing amount of penalty for violation of authorization terms: The legislation defines various criminal and civil offences, specifying penalties for unauthorized telecom services, network access, or violation of terms.

Ø  Adjudication Process: An adjudicating officer, ranked joint secretary or above, will handle inquiries and issue orders for civil offences. Appeals can be made to the Designated Appeals Committee and further to TDSAT.

Ø  Innovation and Technology Focus: The bill emphasizes a dedication to fostering innovation and technological progress in the telecom sector.

Conclusion:

The Telecommunications Act, 2023, introduces a transformative paradigm for India's telecommunications sector, addressing outdated laws and adapting to contemporary challenges. The bill's forward-looking features, including streamlined spectrum allocation and enhanced user protection measures, signify a commitment to fostering innovation and efficiency. Despite commendable strides, the industry calls for further scrutiny and a more balanced regulatory framework mainly due to the retention of certain surveillance powers. As India embraces a dynamic telecom landscape, the act holds the potential to usher in a modern era marked by technological progress and regulatory resilience.

The Alliance of Digital Indian Foundation (ADIF) is a policy think tank committed to fostering innovation and growth of digital startups in India. Stay informed on policy updates through a free subscription to ADIF blogs. Kindly share your feedback and comments with us at office@adif.in. Your insights are valuable to us

ANTITRUST

Google to pay $700 million to US consumers and states to settle a lawsuit accusing the Big tech of unfair practices in Play store

As part of an antitrust settlement with U.S. states and consumers, Google will reportedly pay $700 million and redesign its Play app store to promote greater competition, the firm announced in a federal court on Monday in San Francisco.

As per the settlement, Google is contributing $630 million to a consumer settlement fund and $70 million to a state-use fund.

Google was accused of overcharging customers by imposing unlawful restrictions on the Android app store's app distribution and charging exorbitant fees for in-app purchases.

"The changes Google is required to adopt will result in more innovation among app developers and lower prices for consumers, and that was always our number one goal," Attorney General Josh Stein stated on Tuesday.

He also mentioned that no other U.S. antitrust enforcer has yet been able to secure remedies of this magnitude from Google or another significant digital platform.

According to the lawsuit, Google suppressed rivalry with its Android app store in an effort to increase revenue.

The state solicitors general claimed that Google's practices unduly increased the cost of digital transactions within apps that users of Android smartphones downloaded from the Play Store.

Adobe, Figma withdraw $20 billion deal after hitting regulatory roadblocks

Due to antitrust issues in Europe and the UK, Adobe shelved its $20 billion deal with cloud-based designer platform Figma on Monday. This would have been one of the largest buyouts of a software business.

Announced in September of last year, the cash-and-stock deal was the most recent to come under intense scrutiny from authorities concerned about Big Tech acquisitions that involve startups viewed as potential competitors or threatens to increase the market dominance of dominant businesses.

Adobe has agreed to pay Figma a $1 billion termination fee.

The EU's concerns about potential reduction of competition were echoed by Britain's Competition and Markets Authority (CMA), which stated that the pact will hinder innovation for software used by a large majority of UK digital designers.

The CMA was in the news recently for opposing Microsoft's $69 billion acquisition of Activision-Blizzard.

DATA USAGE & PRIVACY

Digital Personal Data Protection (DPDP) rules may be released within a fortnight

The government may release the administrative rules under the Digital Personal Data Protection (DPDP) Rules within the next two weeks and announce the final version of the bill by the end of January 2024.

Senior representatives from the Ministry of Electronics and Information Technology (MeitY), Government of India, met with executives from social media and internet intermediaries on Wednesday. During the meeting, key topics like child gating, the consent architecture that needs to be framed, and the rights and responsibilities of data principals were covered.

The DPDP, which was passed in August of this year, requires that any business or individual that collects, manages, or uses data from other users, have their explicit consent by informing them of the reasons for which the data is being used.

Additionally, the DPDP Act requires that these businesses that gather, handle, or process data adhere to the commitment for which consent was received.

After five years of development, the Act came into effect in August earlier this year with the President's assent. The executive rules, which specify the guidelines for implementing the law, have not yet been released by the administration.

X, adult content websites under the scanner of the Digital Services Act in the EU

As part of its initial investigation under the Digital Services Act (DSA), the European Union is looking into social networking platform X for possible violations of duties.

Large online platforms and search engines are required by the DSA, which went into effect in November of last year, to take stronger action against unlawful content and threats to public safety.

The investigation will concentrate on preventing the spread of illicit content within the EU and evaluating the efficacy of steps taken to prevent the manipulation of information, such as the "community notes" system.

X's "Community Notes" function, which was released earlier this year, lets users flag erroneous or misleading content in posts by leaving comments. This effectively crowdsources fact-checking, eliminating the need for a dedicated crew of fact-checkers.

The investigation will also look into several facets of the business, such as the data access that X offers to researchers.

The European Union on Wednesday also added three adult content organisations to its list of businesses that will be subject to strict regulations under the DSA.

The Digital Services Act (DSA), which replaced the previous regulations, mandates that businesses manage risk, submit to external, independent audits, and exchange data with government agencies and academic researchers.

The EU had named 19 companies in April under the regulations, including two Meta Platforms divisions, two Microsoft companies, X, and Alibaba's AliExpress.

These corporations will be subject to fines of up to 6% of their worldwide sales if they don't take immediate action to combat misinformation, provide consumers with greater protection and choice, and guarantee better child safety.

ONDC

ONDC ties up with bigger players to facilitate seamless services

Meta launched a cooperation with Open Network for Digital Commerce (ONDC), a government-backed e-commerce network, to upskill small businesses and use Meta's business and technical solution providers for smooth, conversational buyer and seller experiences on Whatsapp.

ONDC will help the businesses become seller apps and onboard onto their network.

As part of the collaboration, Meta will also improve the services provided by Sahayak, the ONDC's Whatsapp chatbot for seller support.

As per ONDC’s CEO, T Koshy, big businesses have the engineering know-how to support individuals in enhancing their potential. Through this relationship, small firms will be able to take advantage of the robust technical tools that larger companies like Meta bring to the table in order to compete on an equal footing.

In addition to making the network possible, it will make small businesses aware of its existence in the market, be connected to it, and prepare them for the changes that come with digitalization.

In order to provide customers with a seamless end-to-end experience in open mobility, ONDC is also collaborating with Namma Yatri and Google Maps to integrate mobility alternatives like local trains, autorickshaws, taxis, and metro.

Developing an integrated cart is the goal. Any good or service that can be catalogued ought to be available on the network.

In the long run, ONDC's long-term goals of standardising ride-hailing and mobility app protocols and uniting them into a single ecosystem will enable businesses like Namma Yatri to construct public infrastructure at lower rates.

AI

Generative AI could add a total of $1.2-1.5 trillion to India's GDP by FY30

By FY2029–2030, generative artificial intelligence (Gen AI) could boost India's GDP by a total of $1.2–1.5 trillion over the course of the next 7 years.

The study released by EY India, titled 'The AIdea of India: Generative AI's potential to expedite India's digital transformation' offered valuable perspectives on the industry's readiness and obstacles in adopting Gen AI.

According to the analysis, India may possibly gain USD 359-438 billion in FY2029–30 alone by fully utilising Gen AI technology and its applications across sectors, representing a 5.9–7.2% growth over and above baseline GDP.

It is anticipated that industries like business services (including IT, legal, consulting, outsourcing, rental of machinery and equipment, and others), financial services, education, retail, and healthcare will account for over 69% of the total contribution.

The expected outcome is likely to enhance work productivity, heighten operational effectiveness, and customise client interaction.

Organisations however, face two main challenges: skills gap (52%), and the availability of unclear use cases (47%). 36% of organisations also view data privacy as a threat associated with the use of Gen AI.

Use of Indian languages in AI essential, will bring down bias in technology: Meity secretary

According to Shri S Krishnan, the Secretary of the Ministry of Electronics and IT (MeitY), Government of India, Artificial intelligence (AI) programming in Indian languages will reduce biases in the future generation of technology that uses only a few or specialised languages.

He stated at an event that India will have leadership opportunities once basic models for AI around languages are built for widespread adoption in the nation.

The government is now developing artificial intelligence (AI) technologies to allow people all throughout the nation to converse easily with one another through digital translation tools created as part of the Bhashini programme.

According to Shri S Krishan, the significance of developing technologies—whether they take the shape of language or other aspects—is growing.

The inherent biases that arises when using data that is obtained only from specific segments or certain languages do go down as more content that is available in Indian languages and as more Indian languages are included into large language models (LLMs) and other forms.

Shri S Krishan also stated that it is imperative that we use local languages if we want to democratise it, increase engagement, and make people feel as though they are part of the process.

It is impossible to overstate the importance of a multilingual internet in this multicultural nation with 22 official languages and dialects beyond counting.

The Alliance of Digital Indian Foundation (ADIF) is a policy think tank committed to fostering innovation and growth of digital startups in India. Stay informed on policy updates through a free subscription to ADIF blogs. Kindly share your feedback and comments with us at office@adif.in. Your insights are valuable to us

The Open Network for Digital Commerce (ONDC) is designed to address various challenges within the digital commerce ecosystem in India. Some of the key challenges that ONDC intends to solve include:

Fragmentation of E-commerce Ecosystem:

The Indian e-commerce landscape is fragmented, with various platforms operating independently. ONDC aims to create a unified and interoperable digital commerce network that facilitates seamless interactions between buyers, sellers, and service providers.

Example: Currently, a local artisan selling handmade products may find it challenging to reach a broader audience because they need to navigate multiple e-commerce platforms, each with its own set of rules and requirements. ONDC aims to streamline this process, providing a unified platform where sellers can efficiently manage their products and services.

Limited Participation of Small and Local Businesses:

Many small and local businesses face challenges in participating effectively in the digital economy. ONDC intends to empower these businesses by providing a platform where they can easily onboard, digitize their operations, and reach a broader consumer base.

Example: A small grocery store in a remote area may face difficulties in digitizing its inventory and joining online marketplaces. ONDC intends to empower such businesses by offering user-friendly tools for digital onboarding, inventory management, and order fulfilment, thereby expanding their reach.

Lack of Interoperability:

The absence of interoperability standards among different e-commerce platforms hinders a smooth and cohesive digital commerce experience for a consumer. ONDC aims to establish a standardized framework that allows different platforms to interoperate, fostering a more connected and efficient ecosystem.

Example: Currently, a consumer using one e-commerce platform may find it challenging to switch to another due to differences in interfaces and payment systems. ONDC seeks to establish a common set of standards, enabling users to seamlessly transition between platforms and enhancing the overall user experience.

Inadequate Digital Infrastructure for Commerce:

Some regions and sectors lack robust digital infrastructure for commerce, limiting the reach and accessibility of digital services. ONDC intends to bridge this gap by promoting the adoption of digital technologies and ensuring widespread access to digital commerce services across the country.

Example: In regions with limited internet connectivity, businesses struggle to adopt digital commerce practices. ONDC aims to address this by supporting the development of digital infrastructure, ensuring that businesses in even remote areas can participate in online commerce.

Data Privacy and Security Concerns:

Privacy and security concerns related to consumer data are significant challenges in the digital commerce space. ONDC seeks to address these concerns by implementing robust data protection measures and ensuring secure transactions within the network.

Example: Consumers may hesitate to share personal information online due to concerns about data breaches. ONDC aims to implement state-of-the-art security measures, assuring users that their data is protected, thereby fostering trust in digital transactions.

Limited Financial Inclusion:

Many individuals and businesses, especially in rural areas, face challenges in accessing financial services through digital channels. ONDC aims to promote financial inclusion by integrating features such as lending and embedded financing options, making digital commerce more accessible to a wider population.

Example: A small farmer in a rural area may lack access to formal financial services for purchasing agricultural inputs. ONDC plans to integrate financial inclusion features, allowing farmers to access credit or financing options directly through the platform.

Uneven Regional Distribution:

Digital commerce growth is often concentrated in specific urban areas, leading to regional imbalances. ONDC intends to promote even distribution by fostering the participation of businesses and consumers across various regions, including rural and semi-urban areas.

Example: Digital commerce growth may be concentrated in metropolitan cities, leaving out businesses and consumers in smaller towns. ONDC seeks to promote regional inclusivity, encouraging businesses from various regions to participate and serve a diverse customer base.

Complexity in Onboarding and Integration:

Small businesses often encounter complexities in onboarding and integrating with digital commerce platforms. ONDC seeks to simplify these processes, making it easier for businesses of all sizes to join the digital commerce network.

Example: A local retailer may find the onboarding process on existing e-commerce platforms complex and time-consuming. ONDC aims to simplify these processes, providing easy-to-use tools and resources for businesses to quickly integrate into the digital commerce network.

By addressing these challenges, ONDC aims to create a more inclusive, efficient, and interconnected digital commerce ecosystem that benefits businesses, consumers, and the overall economy in India.

ANTITRUST

ADIF, along with the Indian startup ecosystem, see Epic’s victory over Google in the antitrust case as a big positive

Epic Games gained victory over Google in the hugely popular antitrust dispute, a decision that might have significant effects on the app store economy. In the dispute, Epic Games claimed that Google was acting as a monopoly in its Play store.

In its case, Epic Games claimed that Google intentionally killed competition by charging developers exorbitant fees of upto 30% for in-app purchases.

According to Epic Games, Google unlawfully links its Play store and billing services, so in order for developers' products to be listed in the store, they had to use both.

Additionally, attorneys representing Epic Games demonstrated that Google engaged in anti-competitive behaviour. One of the more dramatic claims was that Google has a mechanism in place to remove internal messages and texts in order to hide its anticompetitive actions.

The court will start deliberating over potential remedies in January next year. Should the decision stand, developers might have more control over how their apps are marketed and how much money they can generate from them.

The decision may also serve as a model for future antitrust trials involving Big Tech firms globally, including Google's own.

Indian software developers and startup owners are celebrating Epic Games' victory over Google, citing a sense of "vindication" and anticipating "positive ripple effects" on cases akin to theirs in India and other countries.

The judgement aligns perfectly with ADIF's steadfast commitment to fostering equitable competition in the business ecosystem. ADIF acknowledges the pivotal role of startups in propelling economic growth and actively promotes innovation, creating an environment conducive to the growth of startups, which the Epic Games verdict will definitely facilitate.

India has been actively fighting against dominant entities resorting to unfair and discriminatory practices, especially in the last few years. This is effectively illustrated by the judgements passed by the CCI in recent times against Bigtechs abusing their dominance

ADIF has been working assiduously against the exorbitant commissions charged by Google for in-app purchases. ADIF believes that this will go a long way in promoting a fair, transparent, and contestable digital ecosystem, which will be beneficial for our nation and our developing start-up industry.

Apple maybe handed a huge penalty by EU antitrust order in its fight with Spotify

EU regulators are finalising a ruling that would ban Apple's practice of preventing music providers from discouraging its customers from using the App Store in favour of other subscription services. Apple may also face a significant fine from EU authorities.

The decision is expected to be made early in the following year, and Apple may be fined up to 10% of its annual sales.

The investigation was initiated by a complaint filed by Sweden's Spotify Technology about four years ago. The company said that it was compelled to increase the monthly subscription price in order to pay for expenses related to Apple's App Store regulations.

Earlier this year, the European Commission filed a chargesheet against Apple, claiming that the conditions are baseless and could result in higher costs for customers.

Apple attempts to resolve further antitrust woes as it offers to let rivals access tap-and-go tech in EU antitrust case

According to reports, Apple has offered to let competitors access to its tap-and-go mobile payment systems, which are used for mobile wallets. This might resolve EU antitrust allegations and avert a potentially large fine.

Last year, the EU competition watchdog accused Apple of restricting competitors' use of its tap-and-go Near-Field Communication (NFC) technology, which made it harder for competitors to create competing services on Apple products.

The European Commission will probably wait until next month to get input from competitors and consumers before determining whether to accept Apple's offer.

In Europe, nearly 2,500 institutions as well as over 250 fintechs and challenger banks accept Apple Pay. Tap-and-go payments on iPhones and iPads are made possible via the NFC chip.

POLICY & REGULATIONS

India drives discussions on ethical AI use and guardrails in the recently concluded GPAI Summit 2023

Global Partnership on Artificial Intelligence (GPAI), aimed at guiding the responsible development and use of artificial intelligence, grounded in human rights, inclusion, diversity, innovation, and economic growth, constitutes 29 nations including the US, UK, EU, Germany, Israel, Singapore, Australia, Belgium, France, and others.

In the recently concluded GPAI meet, the New Delhi Declaration was unanimously adopted by all the 29 nations. The proclamation committed to developing AI applications in healthcare and agriculture jointly and taking the needs of the Global South into account when developing AI.

Participating countries also agreed in the declaration to use the GPAI platform to develop a worldwide framework for AI trust and safety as well as to make AI benefits and solutions accessible to everyone. In order to complete the suggested framework in six months, India also submitted a proposal to host a GPAI Global Governance Summit.

During the next few months, as India assumes the presidency of GPAI, the focus will be on combining expert resources with those of the Organisation for Economic Co-operation and Development (OECD) to broaden the scope and improve the capacity to identify the most effective approaches to the governance and application of AI for the benefit of society.

On January 10, the Centre will present its official AI policy as part of the India AI Programme. The Korea Safety Summit, scheduled for mid-2024, will serve as a platform for additional global debates on the creation of AI rules.

INDIAN ECONOMY

Indian consumer tech market likely to see a threefold increase to $300 billion by 2027

According to a recently published report, the size of the Indian consumer internet segment will almost triple to $300 billion by 2027 from its current level, with the fashion, mobility, and media sectors leading the way.

The report also mentions that the online retail market is expected to reach $160 billion by 2028 and grow at a rate of somewhere between 23% and 25% annually.

By the end of 2023, the online retail market is predicted to be worth $57–60 billion, up 17%–20% from the previous year. In Indian online shopping, this translates to 240 million to 260 million annual transacting shoppers. However, online purchasing will still account for only 5 to 6 percent of total retail spending. By contrast, internet retail accounts for about 35% of retail spending in China and roughly 24% of total retail spending in the US.

By 2028, 60–70 million families in India are expected to fall into the upper-middle and upper-income categories, which will then likely make up at least 80% of e-retail expenditure.

Quick commerce currently drives about 50% of online grocery shopping. Although metros and tier-1 cities account for 80% of quick commerce volume, more and more shoppers are coming from non-metropolitan areas, with 70% of them originating from tier-2 cities and beyond. Additionally, over 30% of shoppers are younger, having been born in 1997 or later, according to the report. Around 30 percent of internet buyers were from low- to low-middle-class backgrounds.

ANTITRUST

Meta faces €550m lawsuit from Spanish media over alleged dominance in the Adtech domain

Citing unfair competition in the advertising industry, a coalition representing 83 Spanish media sites has filed a €550 million (approximately $600 million) complaint against Meta Platforms. The newspapers together filed the litigation with a commercial court last Friday, alleging that Meta had violated EU data protection legislation from 2018 to 2023.

The plaintiffs claim that Meta has an unfair advantage in producing and providing personalised ads because of its "massive" and "systematic" usage of users' personal data from Facebook, Instagram, and WhatsApp platforms. They claim this unfair competition.

According to the complainants, the majority of Meta's advertisements use personal information that was acquired without the clients' express authorization. They contend that this is against the EU General Data Protection Regulation, which came into effect in May 2018 and requires websites to obtain permission before retaining or using personal data.

The case represents legacy media's (forms of mass media institutions which were more prevalent before the dawn of internet, such as print media, radio and television broadcasting etc) most recent attempt to defend its territory in court against tech behemoths. One of the most notable cases was when the Google News service was shut down by the Spanish government in 2014, which then reopened in 2022 under new rules allowing media outlets to negotiate prices directly with the internet giant.

Many nations, including Canada earlier this year, have implemented laws aimed at forcing tech behemoths to pay for news recently.

Meta’s paid ad-free service violates EU consumer regulations, claims complaint

The largest consumer organisation in Europe, European Consumer Organisation (BEUC), said last week that Meta Platforms' paid no-ads subscription service, which it launched in Europe last month, violates EU consumer regulations.

Claiming that Meta's new service amounted to paying a fee to ensure privacy, the BEUC and eighteen of its members jointly filed a complaint with the network of consumer protection authorities (CPC), two days after advocacy group NOYB filed a complaint with the Austrian privacy watchdog on the same issue.

In addition to this, the BEUC identified a number of other problems.

In a statement, they said that by employing unfair, dishonest, and forceful tactics, such as partially barring users from accessing the services to pressure them into making a decision right away and giving them inaccurate and partial information in the process, Meta is violating EU consumer legislation.

According to BEUC, even if consumers choose the new service, their data would probably still be gathered and utilised for other purposes. Additionally, it criticised the "very high subscription fee for ad-free services" as a potential turnoff to users.

Customers will merely agree to Meta's tracking and profiling at this price, which is precisely what the tech behemoth wants. It is not appropriate to charge people for maintaining their privacy, the Deputy Director General of BEUC said.

For Web users, the monthly fee for the ad-free service is €9.99 euros, while iOS and Android customers need to pay €12.99.

AI & DEEPFAKE

EU's landmark AI rules, which could be voted into law by the EU parliament later this month, still being ironed out

The groundbreaking legislation governing artificial intelligence (AI) in the European Union is currently being negotiated in what some believe to be the last round of talks. The decisions made could serve as a model for other governments creating regulations for their own artificial intelligence sectors.

Governments and parliamentarians are still discussing a number of important topics prior to the meeting, including how to regulate the rapidly expanding field of generative AI and how law enforcement should use it.

The primary problem stems from the fact that the initial draft of the rule was prepared in early 2021—nearly two years before ChatGPT, one of the fastest-growing software applications ever—was released by OpenAI. The act's original risk categories did not clearly apply to ChatGPT and other generative AI tools, which has led to a continuing debate about how they should be governed.

The European Union has proposed regulations pertaining to foundation models, which require enterprises to maintain a comprehensive record of their system's training data and capabilities, attest to the fact that they have taken precautions against potential hazards and submit to audits by outside experts.

However, some of the EU’s most powerful nations, France, Germany, and Italy have contested that in recent weeks. In their view, rather than imposing strict regulations, the creators of generative AI models should be given the freedom to exercise self-regulation, which they argue is essential if European companies are to compete with dominant U.S. players like Google and Microsoft.

Legislators in the EU seek regulations that safeguard citizens' fundamental rights, but member states also want certain latitude so that technology can be utilised for national security purposes, such as by border protection agencies or the police.

The bill might potentially be voted into law by the EU Parliament later this month if a final version is agreed upon. Even then, it might not take effect for nearly two more years.

Governments and lawmakers in the EU may alternatively negotiate a "provisional agreement" in the absence of a final accord, with the details worked out over the course of several weeks of technical discussions.

GoI taking a tough stance on deepfakes, state that violation may lead to action under IPC as well as IT Rules

The Ministry of Electronics and Information Technology (MeitY), together with senior government officials, met with executives from social media and other internet-based intermediaries to "review" their progress in addressing the 'deepfake' issue. Shri Rajeev Chandrasekhar, the Minister of State for Electronics and Information Technology, presided over the meeting.

The government issued a strong message to social media and internet intermediaries, stating that they risk legal action not only under the Information Technology (IT) Rules of 2021, but also under relevant sections of the Indian Penal Code (IPC) for failing to address deepfake, synthetically altered content, and 11 other user harms mentioned in the rules.

According to Shri Rajeev Chandrashekhar, a new amendment to the IT Rules is "actively under consideration" to guarantee social media and other platforms comply with laws regarding deep fakes and other matters to protect public safety and confidence.

The next meeting with the internet intermediaries and social media companies will be held after 7 days.

In order to address the problem of deep fakes, key executives from social media and online intermediaries were met by Union Minister of Electronics and Information Technology, Shri Ashwini Vaishnaw, and Shri Rajeev Chandrasekhar earlier this month.

Following their meetings with these corporations, Shri Vaishnaw and Shri Chandrasekhar declared that deep fakes posed a threat to democracy and stable governance and that they needed to be addressed right away.

While Shri Chandrasekhar stated that all companies should first warn users about the dangers of uploading synthetic and deepfake media at every step of their contact with the platform's interface, Shri Vaishnaw suggested introducing new legislation to deal with deep fakes.

The IT ministry had issued an advisory in November to all social media intermediaries that they take prompt action against deepfake content. The ministry had stated that social media intermediaries must make sure that users of their platform do not host any content that impersonates another person, citing Section 66D of the IT Act as well as Rules 3(1)(b)(vii) and Rule 3(2)(b) of the IT Rules.

On July 7, 2023, the Telecom Regulatory Authority of India (TRAI) unveiled a consultation document titled "Regulatory Mechanism for OTT Communication Services, and Selective Banning of OTT Services."

Definition of OTT

In India's regulatory landscape, the term "Over-the-Top (OTT) services" is contentious and lacks a universally accepted definition, causing confusion for potential regulation. However, TRAI has referred to definitions from international bodies, describing OTT services as those provided over the internet or on top of existing data networks.

The definition employed by TRAI in its Consultation Paper on Regulatory Framework for Over-The-Top (OTT) Communication Services dated November 12, 2018, is as follows:

"OTT communication services (e.g., VoIP) offer real-time person-to-person telecommunication services that utilize the network infrastructure of the telecommunication service provider and compete with them.”

Further, the definition utilized by the Department of Telecommunications (DoT) committee on Net Neutrality is as follows:

"These services (e.g., VoIP) provide real-time person-to-person telecommunication services. These services are like the telecommunication services provided by licensed telecom service providers (TSPs) but are delivered to users as applications carried over the internet using the network infrastructure of TSPs. Essentially, OTT communication services compete with the services provided by TSPs, operating on the infrastructure established by TSPs."

It is important to note that OTT services encompass various categories like Communication Services, Media and Entertainment Services, Gaming Services, Cloud services, and more. These definitions underline the technical distinctions between OTT service providers and Telecommunication Service Providers (TSPs).

Distinction between TSPs and OTTs

Telecom Service Providers (TSPs) and Over-The-Top (OTT) services represent two distinct components within the telecommunications landscape, each playing unique roles with interdependencies.

TSPs serve as the backbone of the telecommunications infrastructure, providing internet access and managing the network layer, including critical resources like spectrum. OTT services, on the other hand, operate exclusively in the application layer, offering various services over the open internet without the need for spectrum or direct network access.

Attempting to subject TSPs and OTT services to the same licensing framework is problematic due to their fundamentally different functions and dependencies. TSPs primarily offer data transmission and internet connectivity, acting as gatekeepers of the internet, while OTT services are oriented towards content creation, application development, and data generation, relying on TSPs' foundational infrastructure for user access.

Moreover, TSPs hold exclusive rights, including spectrum allocation, numbering resources, and rights of way, justified by their significant investments in network infrastructure, whereas OTT services lack such privileges and predominantly operate within the application layer. Recognizing these distinctions is essential to create a regulatory framework that effectively addresses the complexities of the telecommunications ecosystem.

Current Regulatory Framework of OTTs

The present regulatory framework governing OTT (Over-The-Top) service providers is established under the Information Technology Act of 2000. This framework includes various rules and regulations, such as the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules of 2011, the Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules of 2009, the Information Technology (Procedure and Safeguards for Blocking for Access of Information by Public) Rules of 2009, the Information Technology (the Indian Computer Emergency Response Team and Manner of Performing Functions and Duties) Rules of 2013, CERT-In Directions issued in April 2022, and the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules of 2021. These regulations encompass critical aspects, such as data privacy, security practices, information interception, monitoring, decryption, public access blocking, cybersecurity, intermediary guidelines, and digital media ethics.

Moreover, OTT Communication Services, which include messaging through voice, video, or text between terminals, are already regulated under the Indian Telegraph Act, 1885, and fall under the Unified License (UL). Consequently, any service provider primarily offering such services, including OTT providers, should comply with the Act and UL regulations.

Recent legislative developments, such as the Consumer Protection Act of 2019 and the Consumer Protection (E-commerce) Rules of 2020, have also contributed to the regulatory landscape concerning OTT services. The upcoming enactment of the Digital Personal Data Protection Act in 2023, along with the proposed Digital India Act, will further strengthen this regulatory framework.

The rationale for refraining from introducing supplementary regulations, notably in the form of telecommunications licensing, stems from the comprehensiveness of the existing framework. The introduction of such additional regulations could result in unnecessary redundancy, create uncertainty in the business environment, and potentially impede innovation and economic progress.

It is essential to recognize that traditional justifications for licensing, which primarily involve managing limited resources, do not apply to OTTs. OTTs function as internet-based applications independently of resource constraints. Concerns related to competition, consumer protection, and data privacy can effectively be addressed through existing sector-specific laws and regulatory bodies.

The Competition Commission of India (CCI) shares the perspective that crafting a separate regulatory framework for OTTs is redundant and could hinder technological advancement. Therefore, it advocates for avoiding excessive regulation in this domain.

In conclusion, the current regulatory framework governing OTT services is comprehensive and adaptable to evolving requirements. Proposing additional regulations like those applied to telecommunications is not justified in this context and may lead to redundancy, ambiguity, and obstacles to innovation. Existing legislation and regulatory bodies are well-equipped to address pertinent concerns related to accountability, competition, consumer protection, and data privacy within the dynamic realm of OTT services.

Viewpoints of Various Stakeholders involved

Telecom Service Providers (TSPs):

Telecom Service Providers (TSPs) present a compelling argument for the implementation of licensing and network usage fees. Their primary points include:

Infrastructure Investment: TSPs have made substantial investments in building and maintaining the telecommunications infrastructure. Licensing fees can help recover these significant capital expenditures. TSPs argue that the licensing fees are essential for ensuring the continued development and maintenance of robust network infrastructure, including the expansion of networks to underserved areas.

Spectrum Costs: Acquiring spectrum licenses is a costly endeavour for TSPs. Licensing fees serve as a means for the government to allocate this limited and valuable resource while generating revenue to support various government initiatives and services.

Fair Competition: TSPs believe that licensing fees create a level playing field in the telecommunications industry. By imposing fees on all players, including Over-The-Top (OTT) services, fairness is ensured as everyone contributes to the costs of regulation, oversight, and infrastructure development.

Quality of Service: Licensing fees can be linked to network quality and performance standards. TSPs argue that by implementing fees tied to network usage, they are incentivized to maintain and enhance the quality of their services, resulting in better experiences for consumers.

Regulatory Framework: Licensing fees are integral to the regulatory framework that ensures compliance with industry standards and consumer protection measures. They enable regulatory authorities to enforce rules and regulations, fostering trust in the telecommunications sector.

Network Expansion: TSPs argue that revenue generated through licensing and network usage fees can be reinvested in expanding and improving network coverage, especially in rural and remote areas, thereby bridging the digital divide and providing connectivity to underserved populations.

In summary, TSPs advocate for licensing and network usage fees as essential components of a fair and sustainable telecommunications ecosystem. These fees serve various purposes, including infrastructure development, spectrum management, regulatory compliance, and revenue generation for public welfare, ultimately contributing to the growth and accessibility of telecommunications services.

Over-The-Top (OTT) service providers:

OTT service providers present a range of arguments against the imposition of licensing and network usage fees. Their primary points include:

Innovation and Competition: OTTs argue that imposing fees on their services could stifle innovation and competition in the digital space. They contend that their ability to offer new and diverse services has led to a more competitive and dynamic market, benefiting consumers with a wider range of choices.

No Dependency on Network Infrastructure: Unlike Telecom Service Providers (TSPs), OTTs do not own or operate physical network infrastructure. They argue that they rely on existing internet infrastructure provided by TSPs and do not create additional strain on the network. Therefore, they believe it is unfair to impose the same fees on them as on TSPs.

User Choice: OTTs emphasize that their services are chosen by users who willingly download and use their applications. Users often opt for OTT services due to their flexibility, convenience, and often lower costs compared to traditional telecom services. Imposing fees on OTTs could limit users' choices and preferences.

Consumer Benefits: OTTs argue that their services have led to lower costs for consumers, especially in the case of international calls and messaging. Imposing fees on OTTs could result in increased costs for users, reducing the affordability and accessibility of digital communication.

Overlapping Regulation: OTTs point out that they are already subject to various regulations, including data privacy laws and content regulations. They contend that imposing additional fees on top of existing regulations could create a complex and burdensome regulatory environment.

Economic Growth: OTTs argue that their services have contributed to economic growth by providing opportunities for small businesses and entrepreneurs to reach a global audience. Imposing fees could hinder these opportunities and economic benefits.

User Data Protection: OTTs often highlight their commitment to user data protection and privacy. They argue that additional fees could divert resources away from important privacy and security measures.

In summary, OTTs advocate against licensing and network usage fees, emphasizing their role in fostering innovation, competition, and consumer choice. They argue that such fees could hinder their ability to provide affordable and diverse services while creating regulatory complexities in an already well-regulated industry.

Detrimental Impact on Startups:

The imposition of licensing and network usage fees on startups in the digital space can have several detrimental impacts:

Financial Strain: Startups typically operate with limited financial resources, and imposing fees can create a significant financial burden. These fees can divert funds away from product development, marketing, and expansion efforts, potentially hindering a startup's growth prospects.

Entry Barriers: Licensing and usage fees can act as entry barriers for new startups, making it more difficult for innovative companies to enter the market. This reduces competition and can result in a less dynamic and innovative digital ecosystem.

Innovation Inhibition: Startups are often at the forefront of technological innovation. The imposition of fees can discourage experimentation and the development of new services and solutions, as startups may be less willing to take risks due to increased operating costs.

Reduced User Choice: Startups often introduce novel and disruptive services that expand consumer choices. Fees can limit the ability of startups to offer cost-effective alternatives to traditional services, reducing the diversity of options available to consumers.

Unfair Competitive Landscape: Established players with deeper pockets may find it easier to absorb the costs associated with licensing and usage fees. This can create an uneven playing field, where startups face a competitive disadvantage against larger, well-funded competitors.

Market Concentration: The financial burden of fees can force startups to seek acquisition or partnership with larger companies, potentially leading to market consolidation. This concentration of power can reduce competition and innovation.

Dampened Entrepreneurial Spirit: Fees can discourage entrepreneurship, as potential founders may perceive the digital space as less accessible and more costly to enter. This can result in a loss of talent and ideas in the startup ecosystem.

Global Competitiveness: If startups in one region face significant fees, they may be less competitive on a global scale. This can limit the ability of a country or region to foster a thriving digital economy and participate in the global digital marketplace.

Thus, licensing and network usage fees can pose substantial challenges to startups, hindering their growth, innovation, and competitiveness. Policymakers often need to strike a balance between regulating the digital space and fostering an environment conducive to the development and success of startups.

ADIF’s view:

ADIF's thoughtful perspective on the regulation of Over-The-Top (OTT) services underscores the need for a balanced and nuanced approach that respects the dynamics of data consumption, recognizes operational disparities between Telecom Service Providers (TSPs) and OTT services, and upholds the crucial principles of net neutrality. Their vision for a digital India envisions an environment where innovation thrives, accessibility is ensured, and all stakeholders benefit, promoting a dynamic and equitable digital future.

POLICY

Consensus eludes EU gatekeeper status as Meta appeals against it for Messenger, Marketplace

In September, the European Union selected 22 "gatekeeper" services, which are operated by six of the largest tech companies globally, to be subject to new regulations as part of its most recent campaign against Big Tech.

These gatekeepers must let consumers choose which apps to pre-install on their devices and interoperate their messaging apps with rival apps in accordance with the Digital Markets Act (DMA).

Services from Alphabet, Amazon, Apple, Microsoft, Meta, and ByteDance, the owner of TikTok, will be subject to the DMA.

Google and Microsoft have agreed to comply with the EU legislation.

Those who object to the label and its conditions can file a complaint with the General Court of Luxembourg, which handles matters pertaining to trade, the environment, and competition law.

Meta on the other hand filed an appeal on Wednesday against being designated as a "gatekeeper" for its Messenger and Marketplace platforms.

The business declared that it would not contest Facebook, Instagram, and WhatsApp's classification.

Industry insiders reckon that TikTok could challenge its status as well. TikTok had previously declared that the gatekeeper designation was fundamentally incorrect.

EU antitrust authorities are looking into whether Apple's iMessage and Microsoft's Bing should abide by the new regulations.

PRIVACY & USER PROTECTION

Amazon's consumer protection measures under scrutiny as EU opens probe against the Bigtech

In an effort to stack up Amazon's consumer protection policies to a recently passed EU internet regulatory law, the European Commission on Wednesday said that it will be looking into the online retail behemoth.

The information was requested to assess Amazon's risk assessment and mitigation strategies, which are mandated under the EU's Digital Services Act (DSA) "especially with relation to the protection of fundamental rights and the dissemination of illegal products."

Amazon must respond to the queries by December 6th.

The details will shed light on the risk assessments and mitigating actions it takes to safeguard customers' rights and interests online.

After the implementation of DSA, Amazon is classified as a "very large online platform," which means that it has to abide by new regulations (including those pertaining to increased openness, data sharing, and risk management) or face stiff fines of up to 6% of its worldwide sales.

If Amazon doesn't reply, the European Commission has the authority to demand the information by decision (indicating or imposing a penalty) and can impose periodic penalty payments for inaccurate or misleading information.

IT Act, IPC needs stronger provisions to fight deepfake menace

Experts warned that while provisions in the current IT law can prevent deepfakes from being created and distributed, they may not be enough to address the problem. As a result, lawmakers should take action to mitigate the harm that deepfakes can do. The harms caused by deepfakes are only partially addressed by the criminal provisions under the IT Act and the IPC.

State Minister for Information Technology Rajeev Chandrasekhar advised victims to "avail remedies provided under the Information Technology rules" and report incidents to the police. Additionally, social media companies received an advice informing them that if they do not remove detected deepfake content within 36 hours, they risk losing their "safe harbour immunity" under the Act.

But experts pointed out that these are ex-post remedies. When deepfakes and AI-generated false material are disseminated, their harm could cause irreversible damages.

Calls for stringent regulations for AI has grown louder as a result.

A legislation on artificial intelligence (AI) is necessary to regulate the complications surrounding AI and related applications. It also has to outline legal obligations in circumstances of AI-related incidents and offer responsible frameworks to safeguard people in the firing line.

Meta, Alphabet, ByteDance, Snap face lawsuits for social media addiction and mental health deterioration among minors

Major social media giants Alphabet, Meta, and Bytedance attempted to have a statewide lawsuit against them dismissed on Tuesday, but a federal judge rejected their arguments. The lawsuit claimed the companies had illegally lured and hooked millions of minors to their platforms, causing mental health harm.

The ruling encompasses hundreds of claims brought on behalf of specific children who claimed to have experienced detrimental impacts on their physical, mental, and emotional well-being due to their usage of social media, including suicidal thoughts and feelings, anxiety, and sadness.

Among other remedies sought in the lawsuit are damages and a stop to the defendants' alleged wrongdoings.

According to the corporations, the law shields users from liability for anything they post on their platforms and mandates the dismissal of any claims. In a 52-page decision, U.S. District Judge Yvonne Gonzalez Rogers in Oakland, California dismissed claims that the corporations were shielded from litigation by the federal Communications Decency Act and the First Amendment of the United States Constitution.

However, Rogers noted that the plaintiffs' accusations went beyond just highlighting content from third parties, and pointed out that the defendants failed to explain why they shouldn't be held accountable for offering faulty parental controls, failing to assist users in setting screen time limits, and putting up obstacles in the way of account deactivation.

She cited an example that businesses might have alerted parents when their kids were online by using age-verification systems.

As a result, they present a tenable argument that suggests that users suffer injury from defendants' platforms' inability to properly verify users' ages, harm that is different from harm resulting from users viewing third-party content.

Due to their legal standing as product manufacturers, the corporations owed their customers a responsibility. They may face negligence lawsuits for failing to create reasonably safe products and notify users of known problems.

Meta and Snap must detail child protection measures by December 1: EU

The European Commission announced last Friday that Meta and Snap have been given until December 1st by the EU to provide further details about how they shield youngsters from harmful and unlawful content.

The request for information on the measures the companies have taken to improve the protection of minors comes a day after a similar message by the EU to YouTube and TikTok.

The Commission also issued urgent orders to Meta, X, and TikTok last month, requesting them to provide information on the steps they had taken to stop the spread of violent content, hate speech, and terrorist-related content on their platforms.

If the Commission is not pleased with the corporations' answers, it may launch investigations.

Major internet platforms now have to take additional steps to remove dangerous and unlawful information under the recently enacted Digital Services Act (DSA), or risk fines of up to 6% of their global revenue.

ONDC

ONDC introduces Network Gift Card for corporate gifting and employee engagement

A network-level gift card called the "ONDC Network Gift Card" has been made available by the Open Network for Digital Commerce (ONDC) so that businesses can use it for employee engagement and corporate gifting for the forthcoming holiday season.

The Rupay Network powers these gift cards, which can be loaded with up to Rs 10,000.

Thampy Koshy, the chief executive of ONDC, noted that unlike traditional gift cards, which are restricted to a particular platform or brand, ONDC's gift cards provide customers the option to buy from any brand or product.

Customers can use any ONDC buyer app to make purchases from the network's thousands of vendors using these cards.

The network will be reaching out to more business organisations to encourage them to use the gift cards.

While many other banks and fintech firms are also working to offer ONDC-enabled gift cards, sponsoring organisations can currently contact YES Bank and Omni Card to issue these gift cards.

POLICY

Data Protection Board to be operational within the next 30 days

Rajeev Chandrasekhar, the Minister of State for Electronics and IT, announced on Wednesday that the Data Protection Board (DPB) established by the Digital Personal Data Protection (DPDP) Act would be operational within the next 30 days.

The DPB will be established in accordance with the DPDP Act, with a chairperson and members chosen by the national government. Upon learning of a breach involving personal data, the DPB is empowered to order any immediate corrective or mitigating actions, investigate the incident, and apply penalties in accordance with this Act.

Even though it is not in place currently, according to Shri Chandrasekhar, the law is still in effect. He also said that the board will investigate any violations that arise after it is established.

The government on Wednesday held an industry consultation regarding the rules for the DPDP Act, which came into effect last August.

Sri Chandrasekhar stated that the majority of the Act's provisions, with the exception of age-gating, are expected to transition within a year.

For eKYC and age-gating compliance, the minister stated time can be given because the necessary infrastructure needs to be put in place.

End-to-end encryption on Messenger and Instagram a point of contention between Meta and UK

After the Online Safety Bill was approved by the British parliament, Britain urged Meta not to implement end-to-end encryption on Instagram and Facebook Messenger without safeguards to shield children from sexual assault.

End-to-end encryption was planned to be implemented across Messenger and Instagram direct communications, according to Meta, which currently encrypts messages on WhatsApp. The company claims the technology reinforces safety and security.

Suella Braverman, the British Home Secretary, stated that Meta has failed to provide assurances that they will keep their platforms safe from abusers. She added that they must create suitable safeguards to go with their end-to-end encryption plans.

In the new law, end-to-end encryption is a point of disagreement between businesses and the government.

WhatsApp and other messaging companies are opposed to a clause that they claim might force them to compromise end-to-end encryption.

The measure, according to the government, does not put a stop to the technology; rather, it mandates that businesses take steps to prevent child abuse and, as a last resort, develop technology to scan encrypted data.

UK focuses on transparency and access with new guidelines on AI

Britain outlined principles on Monday that emphasise the need for accountability and transparency in order to avoid a small number of tech giants from controlling artificial intelligence (AI) models to the disadvantage of consumers and enterprises.

The Competition and Markets Authority (CMA), the nation's anti-trust watchdog, is attempting, like other governments across the world, to curtail some of the potential drawbacks of AI without inhibiting innovation.

The seven guidelines it outlined attempt to control fundamental models like ChatGPT by holding developers responsible, preventing Big Tech from entangling technology in their walled platforms, and putting an end to anti-competitive behaviour like bundling.

The proposed guidelines also include flexibility for enterprises to employ different models and diversity of business models, including both open and closed models.

The CMA's draft guidelines, which come six weeks before Britain holds a summit on global AI safety, will serve as the foundation for its AI policy as it obtains new authority to regulate digital markets in the coming months.

The antitrust regulator declared that it would now solicit opinions from top AI developers like Google, Meta, OpenAI, Microsoft, NVIDIA, and Anthropic as well as from academics, governments, and other regulators.

ANTITRUST

Google’s last roll of the dice to overturn $2.6 billion EU antitrust fine

Alphabet's Google made a last-ditch attempt at Europe's top court to reverse a 2.42 billion euro ($2.6 billion) EU antitrust penalty levied for market abuse relating to its shopping business, claiming that authorities had not proven that its actions were anti-competitive.

After the General Court dismissed Google's appeal of the penalty imposed by EU antitrust chief Margrethe Vestager in 2017, in 2021, the company resorted to the Court of Justice of the European Union (CJEU).

Attorney for the Commission Fernando Castillo de la Torre rejected Google's claims, claiming the corporation had violated EU antitrust regulations by using its algorithms to unfairly favour its price comparison shopping service.

What Google was not entitled to do, according to him, was to use its control over general search to strengthen its position in comparison shopping by promoting results from its own services, adorning them with appealing features, and using algorithms that are likely to push down rivals' results and display those without appealing features.

The CJEU will make a decision on this in the next few months.

INDIAN ECONOMY

ONDC set to disrupt B2B digital commerce across retail, financial services, manufacturing, and agricultural sectors

The Open Network for Digital Commerce (ONDC), particularly in the retail, financial services, manufacturing, and agricultural sectors, is poised to disrupt B2B digital commerce.

ONDC seeks to democratise the e-commerce market by building an open marketplace for small and medium-sized businesses. As long as both the buyer and the seller's platforms are connected to the ONDC network, they can trade even though they are on different platforms.

Small and medium-sized firms (SME) and empowered consumers will characterise India's forthcoming growth phase, which is consistent with ONDO's objectives.

With a unique offering centred on agility, security, and profitability at the same time, ONDC streamlines value chains, fills in gaps, and supports innovation, clearing the way for the next generation to pursue uncharted territory.

Ecommerce already makes up 4.3% of the retail sector, and ONDC is projected to expand it, particularly in the industrial, agricultural, and financial services sectors.

Brands can interact with shops thanks to ONDC, and distributors can use it to locate new markets. "Plug and play" services like real-time ordering, quick delivery, and credit management are provided by ecosystem members and may be used by both brands and retailers. Additionally, the network will facilitate more efficient connections with clients and suppliers.

Regarding financial institutions, ONDC offers a special chance to interact with both the buyer and seller of a transaction as well as to extend to untapped geographic and demographic areas.

Offerings to customers are anticipated to drastically change as a result of digitising small- and medium-sized firm data and utilising services like transaction data, fintech, and account aggregators.

The network has the potential to increase operational efficiencies in the manufacturing sector by 5–10% by serving as a one-stop shop for supply chain entities and facilitating access to unmet demand for small- and medium-sized manufacturers.

In the food delivery sector, ONDC has also established itself as a formidable rival after recording 50,000 eateries for live orders in August—a significant rise from 500 in February. The largest manufacturer of food and beverages, Pepsico, joined ONDC last Monday.

India's DPI will be key in India’s digital journey, will reach 50 countries in the next 5 years

India has shown that there is a reasonable and realistic chance for every country, large or little, to also embrace a tremendous digital journey through its digital public infrastructures (DPIs) and One Future Alliance.

A new normal that is open source, nimble, consumer-driven, and "non-intermediated" replaces the old normal, which was characterised by giant tech companies controlling the market. India is establishing its DPI as a fundamental service for each person.

Particularly among the nations of the Global South, who have long believed that digitisation and technology were reserved for wealthy nations, India's narrative about DPI has found a lot of encouragement.

According to Nandan Nilekani, chairman of Infosys and founding chairman of the Aadhaar project, a global coalition of multilateral organisations, including the World Bank and the IMF, will export India's digital public infrastructure (DPI) model to 50 countries over the course of the next five years.

Using an open architecture, he continued, this new way of thinking about digital infrastructure at population scale will become more and more common and pervasive around the world over the following several years.

In order to support the growing demand for financial transfers to bolster vulnerable areas and populations and emergency finance after extreme climate events like floods, the DPIs will also play a crucial role in climate adaptation and mitigation.

According to Nilekani, one of the effects of climate adaptation will be the need to provide anticipatory funding for the construction of more resilient homes in the event of rising sea levels.

The DPIs' technology can be used to build an interoperable network for accessing batteries and charging stations as electric vehicle use rises.

Over 10 billion UPI transactions recorded in August 2023

The National Payments Corporation of India's (NPCI) Unified Payments Interface (UPI), a real-time payment system, passed the 10 billion transaction threshold in August.

According to NPCI data, the number of transactions on the platform increased to 10.5 billion in August from 9.9 billion in July 2023. UPI reported Rs 15.7 lakh crore in funds paid in August, which is an increase from the Rs 15.3 lakh crore figure for July.

There are now 473 banks actively using UPI.

NPCI reported 6.5 billion transactions in August of last year and 3.5 billion in August of 2021, which helps put the platform's growth in context. The payment method has increased nearly three times in just two years.

Peer-to-peer and merchant transactions have both increased on the network, showing widespread consumer acceptance.

The aim set by NPCI is 30 billion transactions every month, or one billion transactions each day.

Fintech-led businesses to rise to $400 billion by 2030

According to a forecast by early stage venture investor Elevation Capital, the Indian fintech sector will generate almost $400 billion in revenue over the next seven years, expanding four times from current levels.

By FY2030, the industry will draw from a revenue pool of about $70 billion, out of a total of $620 billion total financial services revenue pool.

India currently boasts the third-largest fintech ecosystem in the world, behind the US and the UK, with over 9,000 fintech businesses.

Retail loans and digital payments have gotten between $70 billion and $80 billion apiece. According to the research, the SME financing industry has brought in about $55 billion, while wealth management has brought in between $40 billion and $45 billion.

According to the research, equity injection increased from about $2 billion in 2018 to $6 billion in 2022.

With over 200 million Indians using smartphones for digital transactions, 300 million eKYC transactions occurring each month, and more than 2 million account aggregator consent requests being completed each month, the country's digital infrastructure is playing a critical role in the expansion of Internet businesses.

SME lending, followed by retail lending and fintech Saas, is the biggest innovation opportunity in the country.

Fintechs have received about 14% of all investments in this sector, highlighting its importance to the startup community as a whole.

Fintechs will always play an important part in the Indian financial services ecosystem, even as it becomes more digital overall. Fintechs source and support 70% of digital transactions that are registered in the nation. In the past three years, their share has increased by roughly 2.3 times. Fintechs own almost 50% of active accounts in the stock broking sector.

ANTITRUST

Google reaches tentative settlement with 50 states, Puerto Rico, and DC over alleged Playstore monopoly

A lawsuit brought in 2021 over the tech giant's alleged monopolistic control of app distribution for the software that powers the majority of the world's cellphones has been settled in principle with Google by all 50 states, Puerto Rico and the District of Columbia.

The completion of an agreement, court approval, and approval by the attorneys general and board of directors of Google's parent company are all requirements for the arrangement, which was referenced in a court filing last Tuesday.

The parties are prohibited from divulging its specifics for the time being by the temporary pact's terms.

The fight is for a fair marketplace that encourages competition, innovation, and lower prices for consumers, and they look forward to finalising the agreement and sharing more details in the next 30 days.

The Department of Justice and other federal agencies continue to bring significant antitrust actions against Google that are centred on alleged monopolistic practises in the search and advertising markets. Justice's lawsuit involving search will go to trial on September 12.

Google reached a $391 million settlement with 40 states in November last year regarding the tracking of user locations.

One recent attempt to limit the huge influence accumulated by Google, Apple, Facebook, and Amazon was a lawsuit brought by the state of Utah stating that such companies have established unparalleled digital empires by enticing customers into services with no competition.

The main emphasis of the case involving the states was the influence Google has over its Playstore, which allows it to rake in commissions of up to 30% on transactions made through apps installed on Android-powered handsets. Over 80% of the global smartphone market is made up of those gadgets.

In their complaint, the states disputed Google's assertion that the Android operating system is an open one that gives users additional options. It claimed that in order to maintain its distribution of more than 90% of the apps for Android smartphones, Google had put in place anticompetitive barriers. The attorneys general claimed that this market dominance constituted an illegal monopoly.

A significant case brought by the U.S. Justice Department in 2020 centred on alleged abuses of Google's dominant search engine and its digital ad network, which generates about $100 billion in annual revenue for its corporate parent, Alphabet Inc., is one of the lawsuits the Mountain View, California, company is still fighting.

EU designates six big tech gatekeepers including Google, Meta, and Apple under DMA, introduces provisions for fines and sanctions

Last Wednesday, the European Commission identified six gatekeepers for the first time under the Digital Markets Act (DMA), including Alphabet (Google's parent company), Apple, ByteDance, Meta, and Microsoft, with provisions for severe penalties for non-compliance.

According to a statement from the commission, the six gatekeepers will now have six months to guarantee complete observance of the DMA duties for each of their designated core platform services.

The Commission may sanction a gatekeeper up to 10% of its annual global sales, with a maximum fine of 20% in the event that the gatekeeper repeatedly violates the DMA's requirements.

This entails limiting the six gatekeepers' economic influence, providing customers with more options, and opening up new business prospects for smaller, innovative digital firms, for example through interoperability, sideloading, real-time data portability, and fairness.

In addition, the Commission has opened four market investigations to further examine Microsoft's and Apple's submissions, which contend that some of their core platform services, such as Bing, Edge, and Microsoft Advertising for Microsoft, and iMessage for Apple, do not qualify as gateways despite meeting the thresholds.

These investigations are being conducted in accordance with the DMA to determine if the companies' rebuttals are adequately supported to show that the services in question should not be designated. The investigation must be finished in no more than five months.

In another instance, despite Apple's iPadOS not fulfilling the standards, the Commission started a market investigation to investigate the matter further. This investigation must be finished in a maximum of 12 months in accordance with the DMA.

In cases of repeated violations, the Commission is also empowered to enact additional sanctions, such as requiring a gatekeeper to sell all or a portion of their firm or prohibiting them from acquiring any further services connected to the systematic non-compliance.

Google and Facebook concerned over online news law

Canada said it was dealing with the issues of Alphabet's Google and Meta Platforms that they would be subject to an unlimited liability when it presented draft regulations for a bill intended to require them to pay news organisations.

The Online News Act of Canada, which is a component of a global movement to make Internet behemoths pay for news, was passed into law in June and is scheduled to take effect in December.

According to the proposed legislation, Facebook and Google will have to voluntarily negotiate agreements with Canadian news publishers and pay a part of their worldwide income based on a predetermined formula.

On its platforms in Canada, Meta has already stopped allowing news sharing. Before the regulation takes effect, Google Canada also intends to remove news from search results.

A Canadian government official told reporters in a briefing that the preliminary ideas, which will undergo public input, would raise C$172 million ($126.6 million) yearly from Google and roughly C$60 million yearly from Facebook.

Companies can be required to engage in mandatory negotiations under the CRTC's supervision if they fall short of a payment threshold through voluntary agreements.

A framework for discussions between news organisations and internet behemoths will be established this autumn, according to the responsible Canadian regulator, with the intention of starting mandatory bargaining by the beginning of 2025.

The proposed guidelines permit both monetary and non-monetary contributions to news organisations as well as taking into account current business arrangements.

According to the proposed legislation, agreements that Google and Facebook reach must also cover independent local, Indigenous, and official language minority community news businesses.

Microsoft to unbundle Teams from Office to address EU antitrust concerns

Microsoft announced on Thursday that it would detach its chat and video app Teams from its Office product and make it simpler for competing businesses to integrate with its software in an effort to avoid a potential EU antitrust fine.

The adjustments were proposed a month after the European Commission opened an investigation into Microsoft's integration of Office and Teams in response to a complaint made by the Slack workspace messaging software, which is owned by Salesforce.

Microsoft's initial concessions fell short of resolving issues.

As per the developments, the changes seek to address the two major concerns that, the customer should be able to choose a business suite without Teams at a lower price than those with Teams included, and the bigtech should do more to facilitate interoperability between competing communication and collaboration solutions and Microsoft 365 and Office 365 suites.

The modifications will be applicable across Europe and Switzerland starting on October 1.

Teams will be sold to Microsoft's core enterprise customers, who account for the majority of the company's commercial operations in Europe, for 2 euros less per month or 24 euros ($26.17) less per year.

Similar to what it does with Teams, Microsoft will also create a new strategy for hosting the Office web applications within rival services and applications.

Recent Development

Indian cryptocurrency traders are grappling with a new challenge as Income Tax Return (ITR) forms now require disclosure of virtual digital assets (VDAs). This inclusion has left traders unsure about whether to reveal their crypto holdings abroad to tax authorities, particularly if their VDAs are on offshore exchanges like Binance. The lack of clear policy guidelines further complicates matters, necessitating a unified approach to regulate the cryptocurrency sector, as highlighted in the Economic Survey, 2023.

Prior to examining the regulatory frameworks of cryptocurrencies in India and other prominent nations, it is imperative to gain a comprehensive understanding of the fundamental aspects of cryptocurrency.

What is Cryptocurrency

Satoshi Nakamoto introduced the first cryptocurrency namely Bitcoin in 2009. A cryptocurrency is a type of digital currency based on cryptography, which ensures anonymity and security. It operates as a decentralized medium of exchange without the need for central banks, relying on blockchain technology. Transactions are recorded in a public ledger, and digital wallets are used for storing cryptocurrency. The system allows peer-to-peer payments from anywhere, with payments existing as digital entries in an online database rather than physical money exchanged in the real world.

Market Share of Cryptocurrency

India has emerged as the world's second-largest cryptocurrency market, following the United States, according to the 2021 Global Crypto Adoption Index. The report highlights a significant increase in cryptocurrency adoption in India in 2020, with the total value of cryptocurrency received by Indian users surging by over 600% to reach $40 billion. India's share of global cryptocurrency activity also saw a notable 12% rise during the same period, driven by a young and tech-savvy population, growing adoption by small and medium-sized businesses, and the government's favorable approach to cryptocurrency regulations.

Diverse Applications of Cryptocurrencies

Cryptocurrencies have diverse applications in the modern digital landscape:

• They serve as a means for digital payments, allowing users to make online purchases, conduct transactions, and perform swift cross-border money transfers.

• Many individuals also perceive cryptocurrencies as investment opportunities, hoping to gain returns through value fluctuations.

• Cryptocurrencies play a significant role in decentralized finance (DeFi), enabling users to engage in lending, borrowing, and earning interest without relying on traditional financial intermediaries.

• Facilitate fundraising for projects and startups through methods like Initial Coin Offerings (ICOs) or Token Sales.

• Gaming platforms and applications utilize cryptocurrencies for in-game purchases and creating unique digital assets.

Benefits to startups:

Accepting cryptocurrency payments brings several benefits for businesses:

• Direct transactions: By utilizing crypto, businesses can eliminate intermediaries, streamlining refund and chargeback processes while minimizing the chances of fraud and errors.

• Reduced fees: Cryptocurrency transactions generally incur lower fees, typically less than 1% of the transaction amount, in contrast to the higher fees associated with credit card sales (up to 4%).

• Protection against fraud: Cryptocurrency payments offer security against fraudulent chargebacks, like cash transactions, as there are no third-party intermediaries involved.

• Enhanced customer convenience: Providing cryptocurrency payment options meets customers' preferences for secure and digital payment methods, enriching their overall shopping experience.

• Expanded global sales potential: Embracing cryptocurrencies allows businesses to avoid foreign transaction fees and decrease the delay between payments, opening new markets and increasing sales opportunities.

Disadvantages of Cryptocurrency

• High volatility and instability: Cryptocurrencies exhibit significant price fluctuations and lack stable value because of reliance on investor sentiment, making them prone to rapid changes.

• Lack of government regulation: Cryptocurrencies are not governed by any central authority or official body, resulting in limited legal protections for users.

• Irreversibility of transactions: Once a cryptocurrency transaction is executed, it cannot be reversed, and there are limited security measures because of user anonymity.

• Dependency on private keys: Users who misplace or lose their private keys risk losing access to their cryptocurrency holdings permanently.

• Limited acceptance: While gaining popularity, cryptocurrencies are not universally accepted as a form of payment, limiting their practicality in some situations.

• Cybersecurity concerns: Storing cryptocurrencies in cold storage wallets may expose users to potential cybersecurity risks, as these wallets can be vulnerable to hacking attempts.

• Tax implications: The tax departments treat cryptocurrencies as property or investments, and transactions may be subject to capital gains or losses, requiring proper tax reporting.

Regulatory Challenges in Cryptocurrency Space

• The dynamic and fast-changing nature of the cryptocurrency market poses significant hurdles in applying or developing already existing regulatory frameworks.

• Regulatory authorities struggle to attract skilled personnel and acquire the necessary expertise, given their limited resources.

• The decentralized and fragmented nature of crypto markets makes monitoring challenging, as regulators face difficulties in keeping track of numerous participants who may not adhere to conventional disclosure and reporting norms.

Cryptocurrency Regulation in India- A Timeline

Over the course of the past few years, the government's stance on digital assets has undergone significant shifts—from an outright ban on cryptocurrencies in 2016 to the forthcoming Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, aimed at regulation. As of now, there exists no explicit regulation or prohibition concerning the utilization of cryptocurrencies within the country.

2013-2017- Acceptance by banks

In 2013, the RBI warned the public about the risks of using virtual currencies. In 2017, the RBI clarified that virtual currencies were not legal tender, but there was no official ban, allowing most banks to continue facilitating transactions on cryptocurrency exchanges.

2017-2020- Beginning of Regulations by RBI

In April 2018, the RBI imposed restrictions on banks and financial institutions, prohibiting them from dealing with virtual currencies. This move significantly impacted the growth of the cryptocurrency industry in India.

2020-2022- Government’s Positive approach

The Supreme Court of India declared the restrictions on cryptocurrency transactions imposed by the RBI as unconstitutional in March 2020. Subsequently, in December 2020, the government introduced the Cryptocurrency and Regulation of Official Digital Currency Act, which seeks to restrict private cryptocurrencies and establish the digital rupee as the official digital currency. In January 2021, government displayed a positive approach, indicating the government's willingness to consider the use of cryptocurrencies and move towards regulation.

2022-Present- Taxing Cryptocurrency

In India, the Ministry of Corporate Affairs issued a notification on March 24, 2021, making it obligatory for cryptocurrency companies to divulge the gains or losses arising from transactions, the quantum of cryptocurrencies held, and any deposits or advances received from individuals.

The 2022-23 Union Budget in India introduced a 30% withholding tax on virtual currency transfers and imposed taxation on gifts in the form of virtual assets/cryptocurrencies. Concurrently, the RBI recommended implementing restrictions on cryptocurrencies in July 2022, citing concerns about their impact on the country's monetary and fiscal stability.

Further, the Economic Survey of 2023 highlighted the necessity for a unified approach to regulate cryptocurrencies is essential, as the unregulated crypto market poses significant challenges to financial systems worldwide.

Analyzing Present Regulations on Cryptocurrency

Cryptocurrencies are renowned for their robust security, achieved through complex mathematical encryption. Nevertheless, recent studies have uncovered vulnerabilities that expose them to hacking and theft. The current regulations concerning cryptocurrency are deficient in addressing its legal status, leading to potential confusion regarding the taxation of cryptocurrencies without explicit legalization. The government appears to be focused on maximizing its revenue by implementing a 30% tax on cryptocurrency profits until formal regulations are established. Further, accepting cryptocurrency payments benefits businesses with direct transactions, reduced fees, enhanced customer convenience, and expanded global sales potential.

India's incomplete regulations on cryptocurrency, and the potential move to ban it, could lead to the country's isolation from the globalized world where many nations have embraced cryptocurrency regulation as a means of fostering innovation and financial inclusion.

The proposal for creation of digital Rupee by Reserve Bank of India, grants more authority to RBI, despite concerns about the absence of robust data protection laws. The central bank has repeatedly expressed concerns about the potential impact of cryptocurrencies on macroeconomic and financial stability.

The lack of proper regulation or outright bans on cryptocurrencies could lead to their exploitation for illicit activities. The unregulated crypto markets can become avenues for money laundering, fraud, and funding illegal activities.

The encryption technology employed makes it challenging for law enforcement to trace wrongdoers, creating additional complexities. In conclusion, while the strong encryption of cryptocurrencies offers notable security advantages, recent hacking incidents and the potential for misuse in unlawful activities highlight the urgent need for stronger legal frameworks and innovative security measures to safeguard the cryptocurrency ecosystem.

Consequences of Banning Cryptocurrency

It has been seen off late, an active Indian traders participation in cryptocurrency activities. Projections indicate huge growth, with the market expected to reach US$222.70 million by the end of 2023. Further, the India’s crypto ownership rate is almost double than global average of 15 percent. As of 2022 there were two crypto unicorns namely- Coindcx and CoinSwitch and nearly 350 startups blockchain related activities. The world has been shifting towards recognizing cryptocurrency as mode of payments. Like MasterCard and Visa now accept certain cryptocurrencies for payments. Tesla invested $1.5 billion in bitcoin and allowed bitcoin payments.

The Indian authorities have a chance to leverage cryptocurrencies by removing the obstacles related to traditional currencies and positioning the country as a global hub for cryptocurrency investment, thereby attracting substantial business and investment. However, to achieve this, they must meticulously devise fresh laws and regulations specific to cryptocurrencies, as existing laws fall short in regulation of cryptocurrency. Adopting well-crafted regulations that account for the intricacies of cryptocurrencies presents a more balanced approach, enabling India to attract investments and nurture a flourishing cryptocurrency industry while mitigating potential risks. Regulatory policies that are already in place like crypto exchanges required to provide transparent and comprehensive financial statements concerning their cryptocurrency dealings and customary practice for crypto exchanges in the country to retain general KYC information for all traders and investors who have registered on their platforms can help address the grey areas of cryptocurrency regulations.

Can Central Bank Digital Currency be an Option?

In February 2019, the Finance Ministry proposed the introduction of Digital Rupee. The rising global popularity of digital currencies, or cryptocurrencies, has prompted numerous central banks to consider launching their own digital currencies to address existing shortcomings and accelerate the transition towards a cashless society.

Central Bank Digital Currency (CBDC) refers to a digital form of legal tender and liability issued by a nation's central bank. It is denominated in the country's sovereign currency and is recorded on the central bank's balance sheet. CBDC operates as a digital currency that can be converted or exchanged at the same value as conventional cash and traditional central bank deposits of the nation.

CBDC differs from private cryptocurrencies as it operates on a permissioned blockchain, giving exclusive mining and control authority to the Central Government and authorized agencies. It is intended to be a Stablecoin, pegged to the Indian Rupee, offering a secure and convenient currency management solution unlike private cryptocurrency which has notional value.

Non-regulated crypto-backed transactions after ban by RBI: A possibility

It is imperative to acknowledge that the ban on private cryptocurrencies poses technological challenges due to their decentralized nature i.e., lacks a centralized entity or governing authority. Further, a ban on private cryptocurrencies may encounter considerable challenges as digital wallets established on decentralized exchanges (DEXs) that hold cryptocurrencies are not easily traceable. Consequently, complete ban or regulation from the source becomes unfeasible. Instead, the government should regulate and potentially prohibit specific elements such as usage, holding, and transactions within the cryptocurrency domain. Therefore, attempting to ban cryptocurrency as there are concerns related to volatility, consumer risks, power consumption, and potential criminal activities like money laundering and terrorism can have serious repercussions.

Views around the world on Cryptocurrency

European Union

Cryptocurrency legality in the European Union (EU) varies by member state, while taxation ranges from 0% to 50%. Recent directives like Fifth and Sixth Anti-Money Laundering Directives have strengthened KYC/CFT obligations and reporting requirements. The Markets in Crypto-Assets Regulation (MiCA) framework aims to enhance consumer protections and introduce licensing requirements. Additionally, Parliament approved measures requiring specific crypto service providers to obtain an operating license, providing regulators with tools to track crypto usage in money laundering and terrorism funding.

United States of America

The U.S. unveiled a fresh regulatory framework for cryptocurrencies in 2022, granting authority to established market regulators like the SEC and CFTC. The SEC's actions against Ripple and crypto exchanges indicate a trend towards tighter scrutiny. SEC Chairman emphasizes the importance of investor protection, and it is anticipated that stricter regulations will be imposed to manage the influx of new digital currencies. The outcome of ongoing legal cases and regulatory efforts will determine the classification of cryptocurrencies as securities in the future.

China

In China, cryptocurrencies are categorized as assets for inheritance determination. The People's Bank of China (PBOC) has imposed a ban on crypto exchanges. Furthermore, China enforced a prohibition on Bitcoin mining in May 2021, leading to the complete shutdown or relocation of mining operations to more lenient regulatory jurisdictions. Subsequently, in September 2021, cryptocurrencies were unequivocally banned in the country. Despite these stringent measures, China has been actively pursuing the development of its digital yuan (e-CNY) and officially initiated the subsequent phase of its central bank digital currency (CBDC) pilot test program in August 2022.

Brazil

In Brazil, Bitcoin may not have the status of legal tender, but a recent law has given cryptocurrencies the green light as acceptable payment methods across the country by including digital currencies and air mileage programs in its definition of payment methods. The government's executive branch will determine the responsible office for monitoring the law's implementation, while tokens considered securities will remain under the jurisdiction of the Brazilian Securities and Exchange Commission (CVM).

United Kingdom

In the UK, cryptocurrencies are treated as property and not recognized as legal tender. Crypto exchanges must register with the Financial Conduct Authority (FCA), and trading of crypto derivatives is not allowed. Specific reporting requirements are in place for Know Your Client (KYC) standards, Anti-Money Laundering (AML), and Combating the Financing of Terrorism (CFT). Taxation of crypto transactions depends on the nature of activities and the parties involved, with capital gains tax applicable to trading profits. As of August 2022, crypto firms must comply with reporting obligations to the Office of Financial Sanctions Implementation (OFSI) regarding financial sanctions and suspicious activities.

South Korea

South Korea enforces stringent rules for cryptocurrency exchanges and virtual asset service providers, mandating registration with the Korea Financial Intelligence Unit (KFIU), a division of the Financial Services Commission (FSC). Privacy coins were also banned from exchanges in 2021. Additionally, the implementation of a 20% tax on digital assets, initially scheduled for 2022, has been postponed to 2025.

El Salvador

In 2021 recognized Bitcoin as the legal tender, thus becoming 1^st country to do so.

Common Thread

The global approach to cryptocurrencies involves continuous development and adaptation of legal, regulatory, and policy measures. In the United States, cryptocurrencies are taxed for exchange, use, and holding, but none are considered legal tender. The United Kingdom treats cryptocurrencies as capital assets, subjecting them to capital gains tax. Canada and Germany have more lenient tax approaches. In Canada, digital assets are regarded as virtual assets, and taxation is applied solely when they are sold. In contrast, Germany views cryptocurrencies as private currency and levies taxes if they are exchanged or sold within a one-year duration. Most countries choose to impose taxes, controlled recognition, and self-disclosure mechanisms to handle cryptocurrency users and investors, recognizing the diverse nature of the cryptocurrency ecosystem.

Way Forward

There is a need to establish comprehensive and consistent global standards for cryptocurrencies, relying on standardized taxonomies and reliable data. Regulatory responses should maintain flexibility to accommodate market developments and future international standards. The recent downfall of FTX, a cryptocurrency exchange, is a testament to the vulnerabilities in the crypto ecosystem. Hence, the lack of comprehensive global regulations for cryptocurrencies is a matter of global concern which must be addressed urgently.

INDIAN ECONOMY

Digital economy likely to account for over 20% of India's GDP by 2026

Rajeev Chandrasekhar, the Union Minister of State for Electronics and Information Technology, forecasted on Thursday that by 2026, the digital economy will account for more than 20% of the nation's GDP. Speaking at the "G20 Digital Innovation Alliance Summit" in Bengaluru, he claimed that India is a leading country that quickly embraced technology and has begun providing solutions to the rest of the globe.

From 4-4.5% of the entire GDP in 2014 to 11% of the total GDP now, the digital economy has grown significantly.

He claimed that India utilised technology to give practical answers that, in recent years, have not only led to widespread innovation, but has revolutionised people's lives, governance, and democracy.

Due to the speed of digitalization, both the upstream and downstream effects of every citizen and consumer using the cloud or consuming digital goods or services, that connect them to the government and governance, must be recognized.

The "centre of gravity of tech," which was formerly concentrated in a small number of nations and revolved around a small number of organisations and businesses, is shifting to open source platforms, and more and more younger startups are disrupting the status quo.

Fintech startups on the rise as over 3,000 recognised startups in the domain currently operating in India

The Department for Promotion of Industry and Internal Trade (DPIIT)'s Startup India initiative has 3,085 recognised startups active in India's financial technology domain as of 30^th April 2023.

The government has started a number of programmes to support entrepreneurs in a variety of industries, with an emphasis on encouraging expansion in the financial technology (fintech) sector. Since the inception of Startup India in 2016, a total of 98,119 companies have received recognition from DPIIT as startups.

For the startups to be recognised by the DPIIT, the government has announced a list of requirements, including the date of registration, revenue and profit benchmarks, and the number of employees. The government occasionally announces various fiscal and non-fiscal incentives for recognised startups.

The International Financial Services Centres Authority (IFSCA) has implemented a number of initiatives to support the startup ecosystem, particularly in the fintech domain.

The creation of a unique "Fin-Tech Entity Framework" to serve the demands of fintechs and techfins is one of these steps.

IFSCA has established an incentive programme specifically for startups and fintechs. This extensive programme includes a variety of incentives, such as startup grants, sandbox grants, proof-of-concept (PoC) grants, green fintech grants, listing funds, and accelerator grants.

The government has implemented the Pradhan Mantri Jan Dhan Yojana (PMJDY) among other strategic measures to increase investment inflows into the fintech sector.

By expediting the enrolment of beneficiaries in new bank accounts, enabling direct benefit payments, and enabling access to a wide range of financial services applications, these efforts seek to increase financial inclusion in India. As a result, fintech firms have been able to find technical solutions that successfully serve India's sizable user base.

The Unified Payments Interface (UPI) and the synergy of the Jan Dhan Yojana, Aadhar, and Mobile (together referred to as the JAM trinity) have also been essential in advancing technical inclusion, transparency, integrity, and the prompt delivery of financial benefits and services to the general population.

RBI could extend incremental CRR and focus on reining in liquidity

In order to combat inflation, the Reserve Bank of India (RBI) may decide to extend the temporary incremental cash reserve ratio (CRR) it imposed on banks last week. This is because the RBI appears to be focusing more on liquidity management than raising benchmark policy rates to control excessive increases in food prices. Inflation measured by the Consumer Price Index (CPI) increased significantly in July from 4.87% to 7.44% year-on-year, mostly due to high vegetable costs. The objective for CPI inflation set by the RBI is 4%, with a tolerance range of 2-6%.

The RBI may decide not to raise the repo rate as it assesses the sustainability of rising food prices and monitors how recent rate hikes have affected the economy, which is threatened by a fragile external environment.

However, by keeping a tight rein on the banking system's liquidity, the central bank can improve the dissemination of its policy initiatives and stop borrowing costs from becoming cheaper.

The RBI may continue to prioritise liquidity management in the near future to make sure that liquidity stays close to neutral and that the interbank weighted average call rate stays at or slightly above the repo rate. The increased CRR published by RBI on August 10 may still be used after being evaluated on September 8.

The repatriation of Rs 2,000 notes to banks, a higher-than-expected surplus transfer from the RBI to the government, and foreign inflows have all contributed to a substantial increase in excess liquidity in the banking system over the past few months. The average daily amount of bank surplus funds held by the RBI reached a 14-month high of Rs 2.5 lakh crore in August.

Excessive banking system money market rates and, thus, the cost of funds in the economy are often dragged down by liquidity. Both price stability and financial stability are at risk from liquidity. The 10% additional CRR on deposits made between May 19 and July 28 is seen as impounding funds worth roughly Rs. 1.1 lakh crore.

OCEN 4.0 with updated API specifications, registry and product network launched to facilitate short-tenor loans to MSMEs

To facilitate cash flow-based MSME (micro, small, and medium businesses) lending, the Indian software products industry think-tank ISPIRT (Indian Software Products Industry Round Table) announced the Open Credit Enablement Network (OCEN) 4.0 protocol.

OCEN is a system of APIs enabling communication between lenders, loan agents, partners in collection and disbursement, providers of derived data, and account aggregators. Up until this point, just a few pilots across the nation and the government's e-marketplace GeM SAHAY were using OCEN.

Along with new API specifications, OCEN has incorporated a registry and a product network in this iteration. These characteristics enable scalability, complexity, and need-based cash-flow-based financing.

Currently, the credit gap for MSMEs is $17 trillion to $24 trillion and that less than 11% of MSMEs have access to formal credit. By developing a framework for short-term and small-ticket loans, enabling remote lenders to operate in other countries, and providing consented access to alternative data sources, OCEN is attempting to resolve these issues.

OCEN is working with stakeholders from multiple domains. Loan brokers Spice Money, Indifi, and Finagg are among of OCEN 4.0's wave one partners. Banks like ICICI, Kotak, Union Bank, and Axis Bank are just a few examples of lenders. Among others, Disseminare and Finarkein Analytics are its technology service providers.

The main barrier to bankers adding short-term lending to their portfolios has been the cost per loan. OCEN 4.0 enables lenders to decrease loan processing and collection expenses, enabling them to disburse small-dollar, brief-term loans at scale. This will make it possible for many new borrowers' sectors to access short-term cash-flow credit.

OCEN has so far been utilised to provide short-term loans with amounts ranging from 168 to 8 lakhs of rupees. Ongoing efforts are being made to find solutions for small firms who have been unable to get one-year working capital loans due to inconsistent business performance over the previous three years.

The typical financing needs of nanobusiness owners range from Rs. 5,000 to Rs. 100,000. The most common uses of credit in company are to buy new equipment, expand the business, manage cash flow that is stalled in receivables, and refill inventories.

Credit needs are frequently unanticipated, urgent, and need for funds can be within a day or two. Due to the challenges in approving such loans and the disproportionately high costs of acquisition and servicing of these tiny loans, this audience has few options for formal sources of credit.

OCEN 4.0 uses the digital public infrastructure to address this issue for all ecosystem actors, including end borrowers as well as borrower agents, lenders, and loan agents.

ONDC

Protean, PayNearby partner to offer credit services on ONDC

Protean eGov Technologies and the fintech company PayNearby have joined forces to offer MSMEs and last-mile borrowers credit services on the ONDC network. After it is launched, the marketplace will make it simple to find a variety of lending solutions at reasonable prices, according to a statement.

Through PayNearby's established Distribution as a Service (DaaS) network, Protean will play the role of an ONDC technology service provider that makes credit available to last-mile borrowers across the nation.

Many people currently lack the technical skills necessary to use account aggregator frameworks, obtain credit against their data, or give their authorization for its use.

This change is a form of intervention that can make use of the physical network that PayNearby has at its disposal. The last mile agent can then offer an assisted service and onboard individuals to join the account aggregator structure and receive credit for their data.

Small business owners will be able to link their bank account or other financial data to the site via the account aggregator framework. In turn, the lender will be able to receive the information from this small bank. The lender would then have the ability to use rule engines to grant loans which could be as low as Rs 25,000 and Rs 50,000. Loan Service Providers (LSPs) will also be consolidated by Protean onto a single platform.

PayNearby and Protean previously collaborated to offer paperless PAN Card services at nearby-by stores across India.

PAYMENTS

NPCI plans to launch voice bots for UPI Payments within the next couple of months

For Indian consumers to use UPI to make payments, the National Payments Corporation of India (NPCI) is developing an interactive system based on voice bots. Within the next two to three months, the system should go operational.

The goal is to create a voice system similar to Amazon Alexa that banks and payment apps may incorporate. Customers who need to complete several procedures in order to make payments through UPI currently, will be able to just speak into the app to execute the same.

This 'add on functionality' must be additionally integrated into the platforms of third-party payment apps.

Customers will be able to begin and complete transactions using this AI-powered technology that allows for communication.

This will undoubtedly leverage creative capabilities and fill the gap to help establish a practical and user-friendly payment system for consumers, bringing a sizable number of users to the digital platform.

This technology could become a use case for all UPI apps if NPCI builds it. By accepting this update, existing payment platforms will be required to launch this update.

ANTITRUST

Snapchat under scrutiny from UK watchdog over inability to keep off underage users from the app

The British data regulator is gathering data on Snapchat to determine whether the American instant messaging service is taking sufficient steps to block minors from using its services.

Social media businesses must obtain parental permission to process the data of children under 13 in accordance with UK data protection law. Users of social media networks must generally be 13 or older, however companies have had varying degrees of success in keeping children off their services.

While the UK media regulator Ofcom thinks that there are thousands of underage users, it was revealed in March of this year that Snapchat owner Snap Inc had only deleted a few dozen minors under the age of 13 off its site in Britain last year.

60% of kids between the ages of eight and eleven had at least one social media account last year, which was frequently made by giving a fake date of birth, according to data from Ofcom. It also discovered that the most widely used social networking app among teenagers was Snapchat.

Following the release of the study in March, the Information Commissioner's Office (ICO) received a number of complaints from the public regarding Snap's handling of children's data.

Some of the criticisms focused on Snapchat's failure to take adequate steps to keep young children off its site.

Norway data regulator fines Meta $98,500 per day over privacy breaches

Meta Platforms have been fined 1 million crowns ($98,500) every day starting today, the 14^th of August, for privacy violations.

On July 17, the company's regulator, Datatilsynet, warned that if it didn't fix the privacy violations, it would be risking a fine.

Datatilsynet had said that Meta must not collect user information in Norway, such as users' actual whereabouts, and use it to target them with behavioural advertising, a Big Tech-favored business model.

It had until August 4 to show the regulator that the problem had been resolved.

The penalty is valid until November 3. If European Data Protection Board concurs with the judgement of the Norwegian regulator, the former may make the fine permanent. Additionally, this might extend the decision's geographic reach to the rest of Europe.

Last week, Meta announced that it would seek EU users' permission before allowing companies to target advertisements based on what users view on its services, like Facebook and Instagram.

The head of Datatilsynet, Tobias Judin said that that action would be insufficient. Meta was required to stop processing personal data immediately and until that consent mechanism was up and running.

Adobe's Figma deal faces stringent EU investigation over concerns regarding stifling of competition

According to EU antitrust regulators, Adobe's $20 billion offer for Figma, a cloud-based design platform, might decrease competition and drive out rivals in the global markets for interactive product design tools.

Concerns were raised by a preliminary evaluation, which led the European Commission to announce that a thorough inquiry of the deal had been launched.

According to the EU antitrust watchdog, the purchase would eliminate a significant rival and might allow Adobe to limit competition in the provision of interactive product design tools on international markets.

It claimed that by combining Figma with Adobe's Creative Cloud suite, the acquisition might also impair the company's ability to develop into a serious rival to Adobe's asset creation tools and significantly lessen competition in the market for interactive product design tools.

The EU competition regulator wants to make sure that users continue to have access to a variety of digital creative tools by conducting a thorough study.

The enforcer of EU competition law stated that it would decide by December 14 whether to approve or disapprove the deal.

Canadian publishers urged the competition authorities to initiate an antitrust probe of Meta over abuse of its dominant position in the news domain

On Tuesday, organisations representing the Canadian news sector urged the nation's antitrust authority to look into Meta Platforms' decision to restrict news on its platforms there, charging the bigtech of abusing its dominant position.

In response to a rule mandating internet giants to pay for news stories, Meta began blocking news on its Facebook and Instagram platforms for all users in Canada last week.

The Online News Act of Canada, which is a part of a global movement to demand digital companies pay for news, was passed as a law in June earlier this year but has not yet taken effect. When the law is put into effect by the end of this year, the government will have finalised the regulations that would oblige the platforms to split some of the advertising money.

News industry associations said in a submission to Canada's Competition Bureau that Meta seeks to impair Canadian news organisations' ability to compete effectively in the news publishing and online advertising markets by blocking news material from its digital platforms.

The applicants said that Meta's anticompetitive actions, which have drawn the attention of authorities worldwide, will boost the company's already-dominant position in social media distribution and advertising while hurting Canadian journalism.

For news organisations to be able to recover revenue losses sustained during the years when Facebook and Google increased their market share of online advertising, Canada's media sector advocated for more regulation of internet companies.

Google has also stated that it will ban news in Canada by the time the regulations come into effect.

ONDC

ONDC aims to set foot into financial services with credit, insurance and mutual fund related products and services

According to T Koshy, the Open Network for Digital Commerce’s (ONDC’s) Chief Executive Officer (CEO), ONDC intends to offer financial services, such as credit and insurance products, to clients over the next months.

By the end of this year, ONDC hopes to execute 1 lakh non-mobility orders and a similar number of mobility transactions each day.

The goal is to begin with financial items in the upcoming months, such as credit, insurance, mutual funds, and anything else that can be documented, with a first export demonstration by September.

T Koshy stressed that the main goal of ONDC is to change the e-commerce environment in India. He is a firm believer in MSMEs' crucial role in determining the direction of the Indian economy. Any firm must comprehend consumer psychology and cognitive processes in order to make better selections in the future, he further stated.

INDIAN ECONOMY

UPI records 9.96 billion transactions in July, up by 6.6% compared to last month

Data from the National Payments Corporation of India (NPCI) shows that the instant payment system Unified Payments Interface (UPI) recorded 9.96 billion transactions in July, with a total value of Rs 15.34 lakh crore.

This is an increase of 6.6% in UPI transactions from 9.34 billion in June. The number of transactions increased by 4% from Rs 14.75 lakh crore within the same time period.

By 2026–2027, UPI transactions—which make up 90% of India's retail digital payments—are predicted to exceed 1 billion per day.

The government has been trying to take UPI to other countries for cross-border transactions, with France being the latest to be added to the list.

In terms of transaction volume, PhonePe holds a 47% market share in the UPI race, followed by Google Pay at 35% and Paytm at 13%.

Semiconductor production is an important piece in the case for Make in India, make for the world

The goal of India's semiconductor mission, according to External Affairs Minister Shri S. Jaishankar, is to help meet both home and international demand for reliable production.

The minister claimed that the semiconductor mission "is truly a powerful case for make in India and make for the world".

He warned the senior executives of the biggest semiconductor companies in the world that their choices and interactions could have an impact on the world economy that goes far beyond their immediate business decisions.

The cause will benefit from India and the US's expanding critical technological collaboration as well as their memorandum of understanding on joint innovation and supply chain for semiconductors.

He also highlighted India's sharp focus in the technology domain.

DATA PRIVACY & CYBERSECURITY

Over 1 lakh cyber security incidents recorded in government organisations this year

Up until June of this year, government entities experienced over 1,12,474 cyber security events, while financial institutions experienced over four lakh instances, according to data given to the Lok Sabha on Wednesday.

Cyber-attacks present a threat to the confidentiality, integrity, and availability of data and services, which may have a direct or indirect impact on the organisation, according to Ashwini Vaishnaw, minister for electronics and IT. This is because cyberspace and digital infrastructure are being used more frequently for businesses and services and technological innovation. Such impact is unique to the attacked entity and depends on the degree to which such attacks have an influence on its data, assets, and services, he added.

The number of cybersecurity incidents in India have been on the upswing over the last few years, with 48285, 192439 incidents related to government organisations or systems in 2021 and 2022, respectively.

German data watchdog probing Worldcoin crypto project due to privacy concerns

Since late last year, a German privacy watchdog has been looking into OpenAI CEO Sam Altman's Worldcoin project because of concerns regarding its extensive processing of sensitive biometric data.

As part of a process to establish a new identity and financial network, Worldcoin asks users to submit iris scans in exchange for a digital ID and, in some countries, free bitcoin.

Worldcoin is being investigated by the Bavarian State Office for Data Protection Supervision since November 2022 due to worries that the project aims to process "sensitive data at a very large scale" with modern technology.

This poses a variety of issues, including the question of whether users have expressly consented to the use of their extremely private biometric data on the basis of "sufficient and clear" information.

According to Worldcoin, 2.1 million people have registered, mainly during a trial period over the last two years.

The widespread collecting and storage of biometric data has long been a source of worry for privacy advocates since it could lead to increased monitoring or the targeting of particular demographic groups.

Many European regulatory bodies are interested in Worldcoin and have requested for more details.

On Friday, France's privacy watchdog stated that Worldcoin's data collecting "seems questionable" in terms of legality.

The data regulator in Britain has also indicated that it will look into the initiative closely.

AI

Number of Metaverse users to surpass 600 million by 2026 due to generative AI, anticipated to grow by 40% year on year in India

According to a report from the cryptocurrency tracking website BanklessTimes, the surge of generative artificial intelligence (AI) will cause the number of Metaverse users to surpass 600 million by 2026.

Over 300 million people are currently active users of Metaverse video games and virtual world platforms, the survey claims.

Because of its astonishing powers to independently create material, graphics, sounds, and even entire virtual worlds, generative AI has recently attracted a lot of interest.

The report also noted that the fusion of generative AI and the Metaverse has the potential to revolutionise a wide range of sectors.

As more users swarm to the Metaverse, traditional gaming, for instance, is poised to develop into more open-ended, player-driven experiences. In-game digital assets with real-world value might be created and traded in entire virtual economies.

The market opportunity for Metaverse and Web3 in India, meanwhile, is anticipated to expand at a rate of around 40% per year and has the potential to reach $200 billion by 2035.

By 2030, it is expected that the worldwide opportunity for metaverse would reach $13 trillion. By 2030, Web3 and Metaverse will contribute around 8% of the $160 trillion global GDP, according to estimates.

Context

The preliminary version of the National Deep Tech Startup Policy (NDTSP) has been made public for feedback. The main goal of this policy is to strengthen India's position in the global deep tech value chain, focusing on key areas such as semiconductors, Artificial Intelligence (AI), and space technology.

Meaning of Deep-Tech

The term "deep-tech startup" lacks a precise definition, but it generally refers to startups that emerge from research-based disruptive innovations originating in STEM labs at academic and research institutions. These startups are characterized by their ability to address complex problems and tackle challenging issues.

Scope of the Policy

The core objective of the policy is to fortify India's position in the global deep tech value chain, with particular emphasis on semiconductors, Artificial Intelligence (AI), and space tech. Its primary focus is on empowering research and development in deep tech startups, streamlining intellectual property regulations, providing financial support, and nurturing the growth of these startups through various means. Notably, the policy targets deep tech startups that tackle fundamental and technical challenges, setting them apart from companies that primarily capitalize on technology through innovative business models. Additionally, the policy outlines strategies for funding deep tech startups during critical stages, such as before their products or ideas are launched in the market.

Notable provisions of the policy

India's National Deep Tech Startup Policy, aiming to fuel the country's knowledge-driven economy, encompasses a range of strategic initiatives.

• Strengthening the research and innovation ecosystem is at its core, fostering scientific breakthroughs and technological advancements. To attract international deep tech startups, the policy emphasizes bolstering the Indian intellectual property regime and ensuring competitiveness.

• Facilitating access to diverse sources of capital is another vital aspect of the policy, achieved through specialized funding programs, increased venture capital, angel investments, and tailored government financial support avenues. Encouraging a culture of industry-relevant research in academia is also highlighted, with an emphasis on translating such research into product and technology leads.

• To expedite product development, the policy advocates for infrastructure and resource sharing with academic institutions, R&D laboratories, and large manufacturing corporations. For hardware-based deep tech startups, the creation of facilities for product prototyping and validation is sought.

• Streamlining the regulatory environment for innovation is a key focus, aiming to create a conducive atmosphere with clear requirements, exemptions, and incentives. Retaining and attracting the finest human capital is also highlighted, emphasizing equity, diversity, and inclusion as core principles.

• Furthermore, the policy promotes the adoption of indigenous deep technologies, both in the public and private sectors, through favorable procurement rules and innovative adoption mechanisms. The aim is to tap into global markets and position India in the global deep tech value chain.

• In alignment with existing national policies and missions, the policy seeks to solve local, societal, and business problems, focusing on key sectors of national interest. Additionally, the policy addresses the sustenance of deep tech startups, providing targeted solutions to overcome the challenges during the Valley of Death (VoD) phase, such as funding limitations, resource constraints, business knowledge limitations, and risk management.

• It recommends the establishment of an Export Promotion Board to facilitate their entry into international markets and advocates for the inclusion of provisions in foreign trade agreements to ensure favorable market access.

• To attract global talent and expertise, the policy proposes resource-intensive measures, including networking opportunities and attractive incentives (visa and immigration support) for international experts interested in contributing to India's deep tech ecosystem.

• Recognizing the diverse nature of deep tech and its intersection with different ministries, the policy suggests the formation of an "Inter-Ministerial Deep Tech Committee." This committee would be tasked with reviewing and coordinating the necessary requirements to create a thriving deep tech ecosystem.

• The focus of the NDTSP is directed towards deep tech startups operating in the defense and space domains, with the primary goal of augmenting their role in bolstering national security and advancing space exploration efforts.

• Furthermore, the policy highlights the importance of engaging with international partners and multilateral institutions in a well-coordinated manner. This strategic approach is crucial for safeguarding India's interests in deep tech development and manufacturing on the global stage.

Challenges NDTSP aims to overcome

• Deep-tech startups have a longer development timeline, typically requiring 5-8 years to reach revenue, compared to 1-3 years for other startups.

• These startups need more capital, specialized talent, and expert knowledge in multiple domains to develop and validate science-based innovations.

• Deep-tech startups face higher risks of failure at every stage, as they must identify real-life problems and validate market demand for their technology.

• Most venture funds in India prefer lower-risk investments, focusing on startups in the consumer economy or those with cloned products.

• Academic researchers in India face challenges converting their research into deep-tech startups due to a lack of entrepreneurial mindset and limited resources and support from incubators and policymakers.