India cannot shut out a “futuristic” technology like cryptocurrency but the country may not yet be ready to follow in the footsteps of El Salvador, India’s finance minister Nirmala Sitharaman told the Hindustan Times. El Salvador became the first country in the world to adopt Bitcoin as legal tender earlier this month.
Citing it as an example, Sitharaman said protests against Bitcoin adoption in El Salvador show that people care what currency is adopted in a country. “You’d think common people don’t care about digital currency; but the public took to the streets against the move,” Sitharaman said. “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?”
As countries have been mulling various ways to regulate cryptocurrencies and launch their own central bank digital currency (CBDC) projects, India has moved more slowly in the space. Despite discussions and studies that have been conducted since 2017, the country has yet to take a clear stance on the legal status of cryptocurrencies.
According to Sitharaman, the government has consulted various stakeholders, including the Reserve Bank of India, which has repeatedly called for a ban on cryptocurrencies, especially for payments. A new inter-ministerial committee set up to study cryptocurrencies this year reiterated the stance taken by the 2017 committee that recommended a blanket ban, along with penalties including jail time for infractions.
“Now we have to formulate this [different views] in the form of a cabinet note on the balance we can strike,” Sitharaman said. The draft crypto bill is currently awaiting a nod from the union cabinet before it can be tabled in parliament.
Although bills are supposed to be published for public consultation, the government has been tight-lipped about the specifics of the crypto bill. Neither the contents nor the main gist of the bill — whether it is going to ban cryptocurrencies or regulate them — have been revealed.
Despite the ongoing regulatory uncertainty, Sitharaman said India cannot afford to ignore cryptocurrencies altogether. “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,” Sitharaman said. “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.”
On the question of whether India should have its own CBDC, Sitharaman said the country needs to make a cautious and calculated decision. “We have to evolve something suitable for our systems,” she said. “India has the strength of 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.”
Last month, RBI governor Shaktikanta Das said India may be able to launch its first CBDC trial project by December. The central bank is currently working on a phased CBDC implementation strategy. Das said the RBI is being “extremely careful” about the CBDC project, which is a first venture of its kind for the central bank.
Earlier this month, former RBI deputy governor R Gandhi said cryptocurrencies could be used for payments once they are defined as an asset or commodity by law. But in July, the current deputy governor of RBI, T Rabi Sankar, said cryptocurrencies are at “substantial odds” to the concept of money accepted historically. “They are not commodities or claims on commodities as they have no intrinsic value; some claims that they are akin to gold clearly seem opportunistic,” he said. “They are not money, certainly not currency, as the word has come to be understood historically.”