Indian government is reportedly contemplating on launching crypto tokens in public sector which may include smart cards such as metro cards and for buying airline tickets with the aim to incorporate cryptocurrency in the financial tree while preventing it from replacing local currency.
India’s relation with crypto, like most countries newly introduced to virtual currency, has remained uncertain.
In December, income tax authorities conducted on-premise searches of nine bitcoin exchanges seeking information on customers who transacted on their platforms. Following the searches, the IT department served notices to 100,000 people believed to have made high–volume transactions
On 5th April, Reserve Bank of India (RBI), prohibited RBI-regulated institutions from allowing their customers to purchase cryptocurrencies and it also barred banks from providing services to businesses dealing with or settling virtual currencies.
Reserve Bank has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies. In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs. Regulated entities which already provide such services shall exit the relationship within a specified time.
Before RBI mandated the closure of any accounts, Indian banks had already begun to restrict the ability of cryptocurrency exchanges to secure access to financial services and locals to trade with funds stored in Indian bank accounts that caused a volume trading crash of almost 90% in two months.
A few days later, the India’s Ministry of Finance announced the formation of a committee to look into the growing ‘concerns’ about cryptocurrency. Although a solid framework of cryptocurrency is absent in India, the committee was formed to examine the existing global regulatory and legal structures governing virtual currencies and to suggest measures for dealing with such virtual currencies including issues relating to consumer protection, money laundering, etc
The committee is now looking into the incorporation of cryptocurrency in public and private sectors and the possibility of using cryptocurrencies for financial transactions and the regulations that are needed.
The committee is examining if crypto tokens can be used to replace smart cards such as metro cards in the public sector to start with. Similarly, in the private sector, it can be used in loyalty programmes such as air miles where its use is limited to buying the next ticket and can’t be converted into money.
Although the Reserve bank of India has openly acknowledged the potential benefits of cryptocurrency, the way forward is most likely to be a gentle inclusion of crypto in everyday lives. As a ministry official said:
Crypto tokens, if introduced, will be a kind of digital token for currency and not a substitute for fiat currency. 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.
At the end, we never know which side is cryptocurrency going to end up when the committee has made up it’s mind but one thing’s for sure: crypto is here to stay.