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How cryptocurrency has already divided top Indian policymakers

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Cryptocurrency Bill: While there are mixed opinions on crypto and its future, the RBI has consistently resisted private cryptocurrencies such as bitcoin.

How cryptocurrency has already divided top Indian policymakers
Private virtual currencies have been the subject of serious debate for quite some time. The crypto lobby has been pitching the technology advantage of cryptocurrencies and has already unleashed a massive campaign to attract youngsters. But the fate of cryptocurrencies such as bitcoin in India will depend on a national law soon to be debated in Parliament. This adds bite to the conflicting opinions among top policymakers about cryptocurrencies. Let’s take a look at some of the recent comments.
On December 1, Infosys co-founder and chairman Nandan Nilekani said crypto assets should be used to bring about financial inclusion. “There is a role for crypto as assets but they obviously will have to follow all the laws and make sure that it doesn't become a backdoor for money laundering... They have to use that
This comment came as a surprise to many as both the government and the central bank have been cautioning the general public, especially youngsters, about cryptocurrencies.
Just last month, in his first comment on cryptocurrency, Prime Minister Narendra Modi said bitcoin presents a risk to younger generations as his government prepares to introduce legislation to regulate digital currencies.
Interestingly, R. Gandhi, a former Reserve Bank of India (RBI) deputy governor, has spoken in favour of crypto, saying at an event in September that India must accept it as an asset class.
Former RBI governor Raghuram Rajan said only a “handful” of the 6,000-odd cryptocurrencies in existence today might survive .
Some do not want to comment. “Everything that needs to be said on cryptos has been said and what is not said is not worth being said,” said a former RBI governor when asked his opinion.
Another senior banker who is among the top leadership team of a private bank said. “I do not have enough knowledge about crypto to comment. But if you are asking my personal opinion as an investor, I will not put my money into this,” said the banker.
RBI vs crypto
While there are mixed opinions on crypto and its future, the RBI has consistently resisted private cryptocurrencies such as bitcoin. Last month, RBI governor Shaktikanta Das reinforced the argument. “When the central bank says we have serious concerns after due internal deliberations, there are far deeper issues involved,” said Das at the SBI Banking and Economics Conclave on November 16.
Das added that he was yet to see any serious discussions on cryptocurrency. Responding to the argument that crypto heralds a new technology, Das said the blockchain tech it is based on is 10 years old and that it can grow even without cryptocurrencies. The urgency to introduce the cryptocurrency bill at the earliest comes in the light of what many in the government see as unchecked growth of an unregulated sector and can be gauged from the multiple meetings being held, including one chaired by Modi.
Das has cautioned against cryptocurrency at multiple fora—every time reiterating that the central bank has communicated its concerns to the government on crypto. The RBI’s view on crypto is critical as the government cannot ignore the strong warnings from the guardian of the financial system on what it sees as an issue of major concern to macro financial stability.
In his short response at the SBI conclave, Das also refuted the claims on the size of the crypto market in India, saying the numbers look exaggerated, a point the governor had made earlier as well. Many of these accounts are small-ticket investments in the range of Rs 500 to Rs 1,000, Das said.
The repeated warnings from Mint Road come at a time when the crypto lobby is on a nationwide campaign to attract fresh investors into the virtual currency market. There are even newspaper advertisements offering crypto trading training to retail investors. The RBI had to clarify on an April 2018 circular that imposed restrictions on crypto after the Supreme Court struck it down in 2020. But banks have adopted a highly cautious approach on cryptocurrency, taking cues from the central bank’s messaging.
What is certain is the creation of a central bank digital currency (CBDC). This is different from private virtual currencies such as bitcoin. CBDC is the digital form of fiat money. There is speculation that the CBDC may find mention in the crypto bill.
Whichever side of the debate various policymakers are, the fate of cryptocurrency in India, as stated earlier, will depend on how the law is framed.
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