The Indian government is considering launching crypto tokens for financial transactions in the country, although the existing ban on cryptocurrencies is likely to continue. A committee studying the use of crypto assets is working on a set of regulations and specific actions, including a road map for allowing cryptocurrencies in future. Once the draft regulations are ready and legally examined, it will be presented before the Parliament.
Crypto token operates in a closed system and doesn’t impact the country’s monetary policy unlike cryptocurrency, which interferes with the money supply situation. Many governments in the world are considering using crypto token Alok Mittal, President DLAI
Difference between cryptocurrency and crypto token
Unlike digital or cryptocurrency, which is treated as an equivalent of money, the crypto token is a representation of money. It can’t be used in place of fiat money. Crypto tokens are based on blockchain application and in order to buy the crypto token, you have to pay fiat money. Its kind of a 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.
Committee formed for regulating crypto tokens
The committee is examining if crypto tokens can be used to replace smart cards such as metro cards in public sector to start with. Similarly, in the private sector, it can be used in loyalty program such as air miles where its use is limited to buying the next ticket and can’t be converted into money, the inter ministerial Committee (IMC), comprising of members from RBI, Sebi and IT ministry was scheduled to give its report in July. As part of its efforts, the committee’s reports will include an analysis of what it considers would be the prospects and consequences of government legalizing cryptocurrencies.
The committee is studying the possibility of using cryptocurrencies or the crypto technology (distributed ledger technology) for financial transactions and also what kind of regulations are needed for that, Sobash
While the cryptocurrency is totally banned in India, the committee that was formed to regulate the cryptocurrency is discussing its other uses and how it can be mainstreamed in India. Authorities have denied chances of allowing the use of cryptocurrency in any manner including in payment systems. Reserve Bank of India (RBI), in April directed all the banks to stop dealing with individuals and businesses dealing in virtual currencies from July 5.
The banking regulator has come out with regulations. It has debarred the banks from dealing with anybody or any aspect of cryptocurrencies. We don’t believe the cryptocurrencies to be currencies at all. We have issued several advisories for people to not deal with it. Because it is risky, it’s a Ponzi kind of scheme. Therefore, cryptocurrencies are banned in this country.
Crypto tokens will be introduced instead of cryptocurrency
As we have already mentioned that crypto token is the digital form of fiat money, if introduced, crypto tokens will be a kind of digital token for currency and not a substitute for fiat currency. Experts feel that the Indian government is unlikely to shift its stance on cryptocurrency in the near future but may allow crypto tokens to test in the Indian market. The committee will also give prospects and consequences of allowing cryptocurrency.