Amid the growing hold of cryptocurrencies across the world and suggestions that India could develop its own digital currency, Union finance minister Nirmala Sitharaman said that such a decision has to be thought through. Citing the example of El Salvador, which adopted bitcoin as a legal tender, she said that the public took to the streets against the move.
“It’s not a question of literacy or understanding – it’s also a question of to what extent this is a transparent currency; is it going to be a currency available for everyone? El Savador may be an exceptional place where they tried some experimentation. There are other countries that are talking about the central bank having a legitimate cryptocurrency. That could be a possibility,” Sitharaman said in an interview with Hindustan Times’ Editor-in-Chief Sukumar Ranganathan.
Read the full interview here
The finance minister said that a lot of consultation has taken place on the issue of cryptocurrencies in India, adding that the views of the Reserve Bank of India (RBI) were also taken. “This is not an era where you can say I don’t care about what’s happening, or we don’t want to do anything. At the same time, are we yet ready to go the El Salvador way? We have to be sure that a futuristic thing can’t be shut out,” said Sitharaman.
When asked if India should have its own cryptocurrency, Sitharaman said, “We have to evolve something suitable for our systems. India has the strength of the technology; fintech gives us the command over the instrumentalities with which you can play; our economy is full of possibilities. So we have to be cautious; but we have to think it through.”
RBI governor Shaktikanta Das said last month that the central bank may launch a pilot of its digital currency by December this year. Das said in an interview that the RBI is working on a phased implementation strategy for the same.
He also said that the RBI is “extremely careful” about the central bank digital currency (CBDC), which is a new product for it. The RBI defines CBDC as a legal tender issued by a central bank in a digital form. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. Only its form is different.
Virtual private currencies like Bitcoin have gained wide acceptance in the last few years. These are digitally encrypted, decentralised but not linked to or regulated by any government. A CBDC, on the other hand, will be a digital version of the fiat currency – one backed by the government.
Earlier this month, former RBI deputy governor R Gandhi said that people have fully understood that crypto cannot be a currency because the fundamental element of a currency – that it should be a legal tender – is missing in this case.
He made a case for treating and regulating crypto as a separate asset class with a view to enabling governments around the world to effectively deal with illegal activities associated with virtual currencies.
An inter-ministerial panel on cryptocurrency, under the chairmanship of Secretary (Economic Affairs) to study the issues related to virtual currencies and proposed specific actions, has already submitted its report.
It has recommended that all private cryptocurrencies, except any virtual currencies issued by state, should be prohibited in India.