The Indian government is considering the possibility of launching a digital token of its own which would be used for financial activities within its jurisdiction. However contrasting this is, the government recently placed a banking ban which is directly on decentralized cryptocurrency.
Though a committee is saddled with the responsibility to research and formulate a framework for the digital currency sector has been working on this project, they are also considering the feasibility of the digital currency in the mainstream. According to a local publication, DNA India, it was reported stating reliable sources.
It is apparent that the inter-governmental committee has shown it’s flair for the blockchain technology as it is considering using tokens as a substitute for fiat currency which will imply that the token will now represent money. Also, it is intended to be used in the mainstream of the economy replacing flight tickets and metro cards.
From India Ministry of Finance (the financial watchdog of the country), a senior official reportedly said that:
“The committee is studying the possibility of using cryptocurrencies or crypto technology (distributed ledger technology) for financial transactions and also what kind of regulations are needed for that…[while] the currency is banned, the committee is discussing its other usage and how it can be mainstreamed in India.”
It is exigent to note that this committee, which is popularly referred to as the Inter-ministry Committee (IMC), was first for formulated in the earlier days of 2017. Its composition is very dynamic as it engaged a handful of ministry so as to attain perfection, this includes the Indian taxation authority, representatives from other economic stalwarts such as the State Bank of India and ultimately the Central Bank of India.
The reason for the formation of this committee is to make a comprehensive research into cryptocurrency as a whole and not just limited to the sphere of the Indian economy, also, to study the legal roadmap and structure used in various countries around the world and to even come up with constructive and useful measures to curb money laundering. If the inter-ministry committee (IMC) can achieve its objective, the country might consider adopting this as its legal framework for the digital currency.
However, as the committee was contemplating and debating over the said proposal which took more than necessary time and caused an undue delay, the apex bank of the country, Indian Central Bank issued a circular dated April 2018. The circular will forbid all financial institutions registered (including commercial banks) to desist from rendering any service to all cryptocurrency firms in the country.
The secretary of DoEA and head of the IMC, Subash Chandra Garg, explained the undue delay while talking to DNA in an interview that:
“This is a difficult subject, involving technology which is changing every now and then. That’s why it is taking some time.”
This seems like a clear opposite of what he said while on a television interview in June, in which he expressly said that the committee was “in a position to wrap this up [crypto regulations] in the first fortnight of July.”
The Secretary also went further stating that the DEA has issued “several advisories” warning the members of the community of the risks of digital currencies, which is described as “a Ponzi kind of scheme” and not “currencies at all.” though the Reserve Bank of India (RBI) has also issued a ban on banks’ dealings with crypto firms.
He then concluded that the introduction of crypto tokenization would not sufficiently be able to substitute for the fiat currency except if perhaps made legal tender saying:
“One will need to pay physical money to buy a token which could be stored as a code in any basic mobile feature phone. It can even be used for remittances. So, it is easy to implement from technology as well as regulatory point of view. But in case of cryptocurrency, one needs to allow it as a legal tender first.”