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  • Writer's pictureP Xenos and M Bacina

India indignant towards crypto, but open to central bank digital currency

Reserve Bank of India (RBI) Governor Shaktikanta Das has reportedly spoken about the prospects of India developing a central bank digital currency (CBDC) at a recent post-policy press conference.

The comments from the governor make it clear that the RBI is against private digital currency, asserting the sovereign’s right over this function. Das was quoted as saying:

The world over, central banks and the governments are against private digital currency because currency issuance is a sovereign function and it has to be done by the sovereign.

The RBI have never been on friendly terms with digital currency, it was only in April 2018 when the central bank banned financial institutions from providing services to digital currency businesses, including exchanges. A number of blockchain industry stakeholders filed petitions with the Indian Supreme Court challenging the ban but the case is still ongoing. The court is scheduled to resume hearing the case on 14 January 2020.

Das’ statements also reflect the Bill drafted by the Indian interministerial committee (IMC), who are tasked with studying all aspects of cryptocurrency and providing recommendations.

The committee submitted the draft bill entitled “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019” to the Ministry of Finance in February.

However the RBI has been significantly more flexible to the idea of a CBDC over the past year. Governor Das said:

It is very early to speak on a central bank issuing digital currencies. Some discussions are going on. Technology has not fully evolved yet. It is still in very incipient stage of discussions and at RBI we have examined it internally...[a]s and when the technology evolves with adequate safeguards, I think it is an area where the Reserve Bank will certainly look at seriously at an appropriate time.

The IMC is even of the view that it would "be advisable to have an open mind" regarding the introduction of an official digital currency in India.

Is this new-found openness for a CBDC the direct result of nearby countries such as China and Indonesia taking strides within their respective regulatory framework in developing a CBDC? No matter the cause, it is positive to see a nation as opposed to digital currency relax their stance and begin to expend some effort in understanding the potential of this new technology.

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