Like any new technology, blockchain-backed cryptocurrency has its pros and cons. Each day, we discover how people all over the world are bringing cryptocurrency into their regular financial lives. However, at the same time, there are people using cryptocurrency for nefarious schemes such as money laundering and terror financing. The Indian panel that is overseeing the impact of crypto on the Indian rupee is still finding itself in a quagmire over the question of whether or not India should accept this blockchain technology-backed currency.
The crypto-overseeing committee, headed by bureaucrat, Subhash Chandra Garg, is deliberating over the effects of digital currency on the INR. Garg is the economic affairs secretary in the ministry of finance, who has been heading the committee since its inception in November of 2017. The committee is said to be in the advance stages of coming up with a draft for the rules to be followed for digital currency in India.
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According to reports, one of the committee’s main concerns is that if digital currencies, such as bitcoin and ethereum, are allowed as modes of payment in the Indian economy, will it disintegrate the Indian rupee? The panel has been ruminating on how the Indian economic ecosystem would fare under influence from cryptocurrencies, and still do not seemed convinced in favour of the tech-driven currency.
A report released in March 2018 by the Bank for International Settlements (BIS), of which the Reserve Bank of India is a member, has warned that digital currencies have the capability of destabilising traditional banks, in the case that their circulation in the general public is very widespread. While the report envisaged that among its many functions, digital currencies can become a means to settling payments among financial institutions, and hence can be considered to be issued by policymakers, the warning in the report has had the Garg committee thinking a lot.
BIS is a conglomerate of the world’s central banks based in Basel, Switzerland, which consists of 60 central banks, including India. BIS keeps an eye on matters that impact the stability of the global financial system.
The cryptocurrency ecosystem in India, though, supports the idea that it is unlikely that the Indian rupee would see destabilisation on a grand scale in the near future at least.
“At this point it may be a bit premature to worry about this as right now even globally only a handful of payments are made using virtual currencies and that will be the case till blockchain reaches the scale that say Mastercard or Visa have,” Quartz quoted Rahul Raj, founder of Koinex, an Indian cryptocurrency exchange. Therefore, there is (a) considerable time before that concern even comes up.”
Even in the past, the Indian government has clarified again and again that digital coins are not legal anywhere in the country. The government has also never shown any inclination to accept digital coins into the economy. Although it did show an interest in using blockchain to build a central fiat currency.
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“You can’t buy goods and services in India using any other currency such as the dollar, pound or even gold and it needs to be converted first into rupee to complete payments, a stance that can also be adopted for cryptocurrencies,” added Raj.
In fact, the RBI, as well as the Garg Committee, have considered issuing a digital coin of their own. However, the risks involved with virtual currencies, such as money laundering, terror financing, illegal transactions, and even fraud and cheating, have held the government’s decision back from encouraging their use.
While the draft is still taking time, meanwhile, the cryptocurrency ecosystem of India awaits in a somewhat confused state of whether or not to invest or how much to invest in the crypto space. Whether this delay would mean that India is avoiding certain destabilisation or is keeping itself from reaping the benefits of an entity that has taken the fintech world by storm, remains to be seen.