Unlike many other countries, the stance of the Indian government towards cryptocurrencies has remained consistently negative right from the inception. The Government of India continues to remain hostile to the idea of digital coins, and the primary reason behind it is the non-sovereign characteristic of the cryptocurrencies. It is the bone of contention as authorities in India are strictly against the logic of non-sovereign offerings when it comes to the issue of monetary policy.
Monetary and Fiscal Policy
In India, monetary policy and fiscal policy are handled by Reserve Bank of India (RBI) and Government of India, respectively. The RBI, India’s Central Bank, is the supreme authority and acts as a regulator of the Indian banking system and takes important monetary policy decisions.
In April 2018, RBI came up with a directive asking all banks and financial institutions under its purview not to deal with any business organization which is involved in cryptocurrency transactions. It is akin to putting a blanket ban on the cryptocurrencies in the country, even as voices in favor of digital coins continue to catch attention.
Formation of Committee
To investigate the feasibility of cryptocurrencies application in India’s policy framework, the government of India set up a special panel consisting of several senior members from the different Ministries. The formation of the committee gave hope to many crypto enthusiasts that the government might change its mind and adopt a positive and open framework for the cryptocurrency.
However, much to the disappointment of crypto purists, the report of the inter-ministerial panel expressed grave concern about mushrooming of cryptocurrencies in the country. What especially irked authorities are the non-sovereign feature of digital coins.
Given the democratic setup and Federal structure exercised in India with RBI and government being supreme authorities on the matter related to monetary and fiscal policy, this non-sovereign intrusion is something that is not acceptable by the government, at least for now. The report clearly stated that private cryptocurrencies couldn’t replace the fiat currency, and in a country like India, there is no need for private cryptocurrencies to exist alongside the state-issued fiat currency.
Stance Towards Blockchain
Despite being critical of the cryptocurrency concept, the report doesn’t rule out the possibility of issuing a state-issued digital coin. Unlike the cryptocurrency, the Indian government seems to be in favor of blockchain as the report stated that open ledger technology has a tremendous potential to be a game-changer in several different sectors. Its utility in the financial technology domain is especially relevant to the report stating that the government is willing to harness blockchain potential to improve the efficiency and effectiveness of the processes across departments.
Some of the few cryptocurrency enthusiasts have also filed a petition in the Supreme Court of India in 2018 against the virtual ban on cryptocurrencies, but the case has been dragging on without any concrete output to date. It is unlikely that cryptocurrency petitioners will get any major relief from the top Court of India any time soon in the future. So that you know, there is no ban on peer-to-peer cryptocurrency transactions in India.
Global Scenario and Influence
It will be interesting to witness how the Indian users will react to the cryptocurrency project of Facebook known by the name of Libra. Although in the initial stage, the Libra project is unlikely to be offered in India, however, with time, it will ultimately come and then subjected to the regulatory and legal scrutiny from the RBI and government officials.
There is already so much concern about data privacy, especially in the wake of fake news and alleged interference of Facebook in the US presidential election, and in such circumstances, it will be very difficult for organizations like Facebook to get a smooth implementation of their digital coin project. India is one of the leading markets for Facebook, and its company WhatsApp has already started beta-testing for its digital transactions in India. However, there is not much clarity about the project, and in all probability, the transactions on WhatsApp will be powered by Fiat currency.
Summing It Together
Summarily, it seems that way forward for cryptocurrencies in India is quite a difficult one. Blockchain Technology, on the other hand, has already witnessing traction among the businesses in India, which some of the big corporate means like Mahindra using the distributed ledger technology export for its farm-export business. Until and unless, the government and regulatory agencies are convinced of the digital coins, we will not witness any significant increase in cryptocurrency adoption in India.