While cryptocurrencies face an uncertain future in India, Reserve Bank of India Governor Shaktikanta Das told the government it has “major concerns” about the matter.
At the Times Network India Economic Conclave in Mumbai, Das asserted that both the federal government and the central bank were committed to financial stability and there were no differences between the two on this.
He said he had “reasons to believe” the government was in agreement with the “major concerns” flagged by the central bank about cryptocurrencies and a final decision would be taken sooner or later.
The government has been sending contradictory signals about cryptocurrency. It initially favored a complete ban on cryptocurrencies, but later said it does not want to be left out of this technological revolution.
In 2018, the central bank banned such currencies through an order, which was struck down by the Supreme Court last year. Its concerns stem from the non-fiat nature of such currencies and their volatile price movements.
In the past, the Reserve Bank appealed to people to be cautious and advised them not to trade in such currencies.
The central bank is now reportedly working on its own digital currency, which will be different from cryptocurrencies. Das said the Reserve Bank continues its work on a digital version of a fiat currency, and is currently “assessing the financial stability implications of introducing such a Central Bank Digital Currency.”
“As the underlying technology is still developing, we are exploring ways for a clear, safe and legally certain settlement finality, which is most crucial for a secure and efficient payment system,” he said.
The federal government had proposed a complete ban on such currencies in a bill presented in January, but this month Finance Minister Nirmala Sitharaman said she is all for encouraging experiments in the field.
She said the government would allow certain windows for people to do experiments on blockchain, Bitcoins or cryptocurrencies and ruled out a complete ban on them.
She had earlier said an inter-ministerial committee has suggested a ban on private cryptocurrencies like Bitcoin, but has pitched for an official digital currency that will be appropriately regulated by the Reserve Bank.
Meanwhile, Infosys co-founder Nandan Nilekani has backed cryptocurrencies as a store of value, stating that people should be allowed to have it as an asset. Nilekani played a crucial role in building India’s digital payments platform Unified Payments Interface, which was developed by the National Payments Corporation of India in 2016.
It facilitates inter-bank transactions by instantly transferring funds between two bank accounts on a mobile platform, and now 207 banks support this platform.
Nilekani said: “My view is, don’t think of crypto as a transactional currency because it will never be able to meet the transactional efficiency of Unified Payments Interface in India anyway. Unified Payments Interface does 2.3 billion transactions a month and the architecture built by the National Payments Corporation of India is for 1 billion transactions a day at almost zero cost.
“So Bitcoin can never compete on transactional efficiency.” We need to think of Bitcoin as a store of value, he added. “Think of it like an asset class, like gold and real estate. You can put some rules around it.”