India Evaluating Options for a State-Owned Cryptocurrency
Uncertainty seems to be brewing for quite some time in the Indian cryptocurrency market. Although the country’s finance ministry has set up an official task force to look into this matter, little amount of progress seems to have been made.
According to the latest report by Quartz on Wednesday, October 10, a senior government official, aware about the working of the crypto-panel, said that officials are now exploring the possibilities of a state-owned cryptocurrency working on a government-developed blockchain network.
Quartz cited the senior government official saying “We are evaluating the government-backed cryptocurrency and crypto-token. And we are looking to develop and encourage our own research and development of blockchain technology.”
The latest report comes just under two months after India’s central bank - The Reserve Bank of India (RBI) - announced in August-end that it has formed an inter-governmental department to study the possibility of state-owned cryptocurrency.
The central bank said: “An inter-departmental group has been constituted by the Reserve Bank to study and provide guidance on the desirability and feasibility to introduce a central bank digital currency (CBDC).”
The central bank Annual Report 2017-2018 also noted that one of the reasons to adopt CBDC is to reduce the overall bank note bill.
The government official also told Quartz that the government representatives were working with crypto professionals on this matter. “If a virtual currency is going to be backed by the government then it goes against the whole grain of such coins,” said the executive, requesting anonymity. “These are essentially decentralized ledgers, and if the government or the RBI is trying to control it, then it loses its meaning.”
The worst thing that can happen out of all this is that the government might also consider banning decentralized cryptocurrencies after it rolls out the state crypto token. The official said: “The panel is also discussing amendment of the Currency Act to make possession of any cryptocurrency, not approved by the government, a punishable offence.”
The crackdown on the cryptocurrency market started earlier this year when RBI banned all registered banking institutions to deal with crypto exchanges. The crypto community in India soon retaliated to this by taking the matter to the highest authority i.e. the Supreme Court. However, a concrete decision has yet to arrive in this matter.
Following RBI’s ban, crypto exchanges in India are finding it difficult to continue their operations further. Many of the exchanges are just allowing crypto-to-crypto trading at this moment. Facing a severe liquidity crunch, cryptocurrency exchange Zebpay announced to shut down its operations, just a few days back.