A new report from local Indian news agency, Quartz, suggests that one of the reasons why the government in the country has not yet given its support for cryptocurrencies is that they fear the new money could outperform the fiat currency, Rupee.
The report quotes an anonymous source who is in contact with the interdisciplinary committee set up by the Indian government to evaluate possible regulations for cryptocurrencies. While earlier reports revealed that the committee is on track to release the regulations later this year, it seems something is still bothering them.
“If bitcoin and other digital currencies are going to be allowed to be used for payments then whether it will end up destabilizing the fiat currency is a major concern for them (the committee),” the source told Quartz.
Particularly the committee’s fear lies on the fact that many people could opt to use Bitcoin and other cryptocurrencies rather than the Rupee. If this were to happen, its “overall impact on the financial ecosystem is still unclear,” the source says, citing it as a barrier to convincing the committee to reverse the ban.
The committee’s current stance against the use of cryptocurrencies is supposedly based on March 2018 report by the Bank for International Settlements (BIS). The report encouraged different countries to keep monitoring the development around cryptocurrencies although negatively adding that they could destabilize central banks.
So, it would not be wrong to believe that the committee is playing safe while trying to figure out a way to regulate cryptocurrencies without the fiat currency facing any risks.
Indian Crypto Regulatory Committee Worry Too Early
Speaking in the report, Rahul Raj, founder of Indian crypto exchange Koinex said that the committee’s worry about crypto eclipsing fiat is premature. The volume of global cryptocurrency transaction ($113 billion) is still way lower than the GDP of many middle-sized economies, so the time when crypto will overtake fiat is still far in the future.
In his exact words, he said,
At this point, it may be a bit premature to worry about this as right now even globally only a handful of payments are made using virtual currencies and that will be the case till blockchain reaches the scale that Mastercard or Visa have. Therefore, there is (a) considerable time before that concern even comes up.
Indian cryptocurrency enthusiasts, as well as everyone in the space, will hope that they Committee resolve its issues with crypto eclipsing fiat as soon as possible. As Coinfomania reported in January, Indian Banks are forcefully asking customers to vow never to use Bitcoin or risk losing funds in their account.
Crypto regulatory clarity is surely needed now more than ever in India.