India cannot dismiss a “futuristic” technology such as cryptocurrency, but the country may not be ready to follow in the footsteps of El Salvador, according to India’s finance minister, Nirmala Sitharaman. Earlier this month, El Salvador became the world’s first country to recognize Bitcoin as legal tender.
Using El Salvador as an example, Sitharaman stated that protests against Bitcoin adoption show that people care about what currency is used in a country. “You’d think that ordinary people don’t care about digital currency, but people took to the streets to protest the move,” Sitharaman said. “It’s not just a question of literacy or understanding; it’s also a question of how transparent this currency is; is it going to be a currency available to everyone?”
While other countries have been debating how to regulate cryptocurrencies and launch their own central bank digital currency (CBDC) projects, India has been moving more slowly. Despite discussions and studies since 2017, the country has yet to take a firm stand on the legal status of cryptocurrencies.
According to Sitharaman, the government has consulted with various stakeholders, including the Reserve Bank of India, which has repeatedly called for the prohibition of cryptocurrencies, particularly for payment purposes. This year, a new inter-ministerial committee formed to study cryptocurrencies reiterated the 2017 committee’s recommendation for a blanket ban, as well as penalties including jail time for infractions.
“Now we have to formulate this [various points of view] in the form of a cabinet note on the balance we can strike,” Sitharaman said. The draft crypto bill is currently awaiting approval from the union cabinet before being introduced in parliament.
Despite the fact that bills are supposed to be published for public comment, the government has remained tight-lipped about the specifics of the crypto bill. The bill’s contents and main gist — whether it will ban or regulate cryptocurrencies — have not been revealed.
Despite the ongoing regulatory uncertainty, Sitharaman believes that India cannot afford to ignore cryptocurrencies entirely. “This is not an era in which you can say, ‘I don’t care what’s going on,’ or ‘we don’t want to do anything,’” Sitharaman said. “At the same time, are we ready to follow in the footsteps of El Salvador? We must be certain that a futuristic thing cannot be excluded.”
In response to the question of whether India should establish its own CBDC, Sitharaman stated that the country must make a cautious and calculated decision. “We need to evolve something that is appropriate for our systems,” she explained. “India has technological strength; fintech gives us control over the instruments with which you can play; our economy is full of possibilities.” So we must be cautious, but we must also think it through.”
Last month, RBI Governor Shaktikanta Das stated that India could launch its first CBDC trial project as early as December. The central bank is currently developing a CBDC implementation strategy in stages. Das stated that the RBI is being “extremely cautious” about the CBDC project, which is the central bank’s first venture of its kind.
Former RBI deputy governor R Gandhi stated earlier this month that cryptocurrencies could be used for payments once they are legally defined as an asset or commodity. However, T Rabi Sankar, the current deputy governor of the RBI, stated in July that cryptocurrencies are at “substantial odds” with the concept of money accepted historically. “They are not commodities or claims on commodities because they have no intrinsic value; some claims that they are comparable to gold appear clearly opportunistic,” he said. “They are not money, and certainly not currency in the historical sense of the term.”