- J McGlynn and M Bacina
India intending to innovate with digital Rupee
Following on from indications that India was warming up to a Central Bank Digital Currency, the Indian legislature has published an agenda to ban private digital currencies and provide a framework for its own central bank digital currency.
On 29 January the lower house, Lok Sabha, announced that the legislation aims to:
To create a facilitative framework for creation of [an] official digital currency to be issued by the Reserve Bank of India.
The parliament also said:
The Bill will also seek to prohibit all private cryptocurrencies in India; however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.
The Indian Times describes this bill as a continuation of the recommendations of a committee headed by India’s previous economic affairs secretary S C Garg, who made a similar proposition: that private digital currencies be banned and that
blockchain and distributed ledger technology be utilised in financial services for better loan tracking, insurance claims management and fraud detections.
Not the first attempt to rope in Rupee rivals
In 2019 a draft bill seeking to ban digital currency was introduced to the legislature and and talk of criminal sanctions was reported. The position was later clarified by the Reserve Bank of India which said there was no ban on cryptocurrencies per se, just a direction against banks offering services to digital currency businesses.
That position was struck down by the Supreme court after a cohort of several traders filed a lawsuit against the direction in the circular. The government's recent plans indicate that this ruling has not quashed ambitions in the legislature to ban private digital currencies and for India launch their own central bank digital currency.
Motivation is strong, but the devil is in the details
Rahul Pagidipati, CEO of Zebpay, a digital currency exchange, said:
(the Bill’s) success will depend on the details, particularly the definition of what the bill calls ‘private cryptocurrencies'. This is not a common term.
Bitcoin is not privately owned by anyone. It is a public good, like the internet. Bitcoin and most crypto assets are more like gold and not an alternative to government-issued legal tender... [digital] assets and digital government currency can coexist and together, they can bring tremendous benefits to the Indian economy.
Given the practical difficulties of blocking a technology which is specifically designed to be censorship resistant, it remains to be seen how India plans to criminalize digital currencies while introducing users to its own form of government issued digital currency.