The Reserve Bank of India have made public their exploration of a “fiat cryptocurrency”. Speaking at a fintech event by KPMG, RBI executive director Sudrashan Sen said:
Right now, we have a group of people who are looking at fiat cryptocurrencies. Something that is an alternative to the Indian rupee, so to speak. We are looking at that closer.
Intended to be used in the place of rupees, the central bank could eventually issue digital tokens instead of notes. Just like every other state-issued currency, it would be backed by absolutely nothing.
Sen then went on to call Bitcoin, the world’s first ever totally public blockchain, a “private cryptocurrency”, stating:
Fiat will be instead [when] the Reserve Bank starts issuing digital cryptocurrency, which you can carry in the cyber space with you, when you don’t hae to keep physical currency in your pocket, that’s the way.
The advantages of a blockchain-based currency issued and centralised on government systems are numerous from the perspective of a financial institution like RBI. A centralised, immutable ledger of all transactions the country-over would be a fantastic tool to fight money laundering, tax-aversion, and other forms of crime. But true cryptocurrencies represent far too much risk for central banks.
Sen commented, “as regards non-fiat cryptocurrencies, I think we are not comfortable” — a sentiment which echoes that in the banking sectors, and the legislatures in India and elsewhere across the planet.
Plans now seem to be forming in India on how to treat “non fiat” cryptos. Last month, the Finance Ministry of India said would be beginning to tackle the issue of regulation. An initial committee hearing suggested a lack of optimism for full legalisation.
This follows the Reserve Bank of India’s statement from February of this year. Warning companies for choosing to operate in cryptocurrency, a spokesperson said:
Any such user, holder, investor, trader, etc. dealing with virtual currencies will be doing so at their own risk.
They also cited a host of financial, legal, operational, security, and customer protected issues that companies using Bitcoin and other crypto were exposing themselves to.
Time will tell how harshly the Indian executive will come down on cryptocurrency. With their own bastardised version of Satoshi’s dream in the works, it’s doubtful there’ll be much room for competition, however.
Ref: MoneyControl | Indian Express | Image: Wikimedia (CC3.0)