New Delhi: Looking on the bright side of Bitcoins after El Salvador showed an unprecedented adoption of bitcoin as legal tender earlier this week? You could perhaps take a cue from India’s Central Bank and what it thinks about cryptocurrencies.
The Reserve Bank of India Governor Shaktikanta Das has said the central bank continues to have “serious and major” concerns about the cryptocurrencies like Bitcoin and has conveyed them to the government, adding that it is for the government to take a call on what to do in the matter.
Do cryptocurrencies like Bitcoin and others have government backing?
Cryptocurrencies like Bitcoin are an alternative to government-backed money. These exist only in computer circuits and memory. It’s based on data-scrambling cryptography and hence the term cryptocurrency.
Private Cryptocurrencies like Bitcoin, are unregulated and mined through a complex process and have highly volatile prices. These cryptocurrencies are under the regulatory gaze in India despite their proliferation as an asset class. Calls have been made to treat it as a foreign asset, and the government is to decide whether to allow them fully or not.
Lots of processing power and a distributed global ledger called a blockchain records all transactions. No central bank or other institution has any say in its value, which is set entirely by people trading Bitcoin. Although other countries have dabbled in cryptocurrencies, none has gone so far as El Salvador.
RBI’s take on cryptocurrencies and India’s own digital currency
The RBI had initially banned domestic lenders from facilitating investors’ trade in such assets, which had to be allowed after the Supreme Court struck down the RBI order. As per reports, some banks have restarted their function.
Earlier in March this year, Das had said that he has reasons to believe that the government is in agreement with the major concerns flagged by the RBI.
India has also started working on its own digital rupee, as has been the case with many other economies, and intends to start trials on the same later this year. A couple of months ago, the Reserve Bank of India had said that it is working on phased introduction of its own digital currency.
CBDC (central bank digital currency) is the same as currency issued by a central bank but takes a different form than paper (or polymer). It is sovereign currency in an electronic form and it would appear as liability (currency in circulation) on a central bank’s balance sheet. The underlying technology, form and use of a CBDC can be moulded for specific requirements. CBDCs should be exchangeable at par with cash.
With PTI Inputs