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 has never been friendly to cryptocurrency. In April last year, the central bank banned financial institutions from providing services to crypto businesses including exchanges, forcing some of them out of business. The ban went into effect three months later. A number of crypto industry stakeholders filed writ petitions with the supreme court challenging the ban but the case is still ongoing. The court is scheduled to resume hearing the case on Jan. 14, 2020.
Das’ statements also echo the bill drafted by the interministerial committee (IMC) tasked with studying all aspects of cryptocurrency and providing recommendations. The committee, headed by former Secretary of the Department of Economic Affairs Subhash Chandra Garg, submitted the draft bill entitled “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019” to the Ministry of Finance in February. After it was made public in July, Garg tweeted: “Private cryptocurrencies are of no real value. Rightly banned.”
Regarding whether the RBI is looking into issuing a central bank digital currency, Governor Das said on Thursday that “It is very early to speak on a central bank issuing digital currencies,” PTI further reported. “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,” Das revealed, elaborating:
As 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 draft bill to ban cryptocurrency has a section on central bank digital currency and its proposed legal framework. The IMC is of the view that “it would be advisable to have an open mind regarding the introduction of an official digital currency in India,” its report reads.
The bill defines digital rupees as “a form of currency issued digitally by the Reserve Bank and approved by the central government to be legal tender.” The IMC has recommended that the government, “in consultation with the Central Board of the Reserve Bank, may approve [the] digital rupee to be legal tender with effect from such date and to such extent as may be specified.” In 2017, there were reports of the Indian government considering issuing state-run digital currency called Lakshmi.
The Indian government told the supreme court in August that it planned to introduce the aforementioned bill in the Winter session of parliament but it ended up not being on the agenda. Meanwhile, the crypto community in India strongly believes that the bill is flawed and has been campaigning to convince the government to reevaluate the bill and the IMC’s ban recommendations. In October, Das and Finance Minister Nirmala Sitharaman answered some questions regarding cryptocurrency, stablecoins, and Facebook’s Libra at an IMF and World Bank meeting.
What do you think of the RBI governor’s view on cryptocurrency? Let us know in the comments section below.
Images courtesy of Shutterstock and CNN.
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