A report by Quartz India suggests that the Indian government is concerned about the effect cryptocurrency may have on its national currency.
According to the article, a high-level panel working on a cryptocurrency regulatory framework has observed that a less-explored area for crypto use does exist and possesses as much risk as with the already established concerns of money laundering and terror financing.
The committee, led by the economic affairs secretary in the ministry of finance Subhas Chandra Garg, has expressed concerns about the impact of cryptocurrency on Indian rupee in the long term should it become a recognized medium of exchange.
“If Bitcoin and other digital currencies are going to be allowed to be used for payments then whether it will end up destabilizing the fiat currency is a major concern for them [the Garg panel],” the post reads, citing an anonymous crypto enthusiast who met with the ministers.
The article has cited another report compiled by the Bank for International Settlements (BIS) — of which the Indian central bank is a member — as being the basis for the fears which are further amplified by the uncertainties cryptocurrency may have on the financial ecosystem as a whole as current frameworks are void of an encompassing metric system to account for such scaling effects. More so, the BIS may also be worried that central bank issued digital currencies may also contribute to the instability of the financial system as well.
Perhaps these may be legitimate concerns, as cryptocurrency has so far demonstrated scaling features that could put legacy systems out of commission, and hence affect traditional banks that are unwilling to upgrade. Some forward-thinking financial institutions have begun exploring how to use the blockchain for interbank relations and are considering a digital currency to that effect.
While the banks involved in the transition to blockchain-based systems have stated that the digital currency will be for cross-border payments and would only involve bank-to-bank transactions, the BIS had warned last year that digital coins might destabilize traditional lenders if offered widely to the general public.
The legality of cryptocurrency in India remains flimsy since the committee involved with drafting a regulatory framework have given mixed signals on their stance with digital currencies. At one time, they recommended a ban on cryptocurrency, and later on, warmed up to the idea that “cryptocurrency cannot be dismissed as completely illegal”. With plans to develop its own state-backed cryptocurrency currently on hold, the threats may have indeed been real to the nation.
Rahul Raj, founder of Koinex, has opined that such worries are premature, as nothing of the sort could happen in the near term given that cryptocurrencies are only being used in a very small circle for purchases. But it was further suggested that the concerns can only become of effect if blockchain has scaled to the level of Mastercard and Visa.
Bitcoin News published early today a report on a sample poll survey revealing that in the US, only 3% of people used Bitcoin to make purchases in the past month. This goes further to prove Raj’s point and while the hype about cryptocurrencies is mainly bolstered by the speculative value, the utility aspect of most blockchain products are still a while off from full-scale adoption.
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