An Indian Cryptocurrency? Government Considering One Despite Reservations

The Indian government is considering the possibility of bringing out its own cryptocurrency while the verdict relating to cryptocurrencies — prohibition on offering banking services to cryptocurrency-related entities — in the country's Supreme Court is still pending. A panel constituted by the Ministry of Finance would likely soon recommend the country should launch a government-backed cryptocurrency, Quartz India reported Friday, citing an unnamed source.

After the country's central bank, Reserve Bank of India (RBI), sent out a circular in April prohibiting banks from offering services to cryptocurrency-related entities, a committee was set up to review and recommend further steps for cryptocurrencies in India. A draft was to be prepared by the committee to be discussed with the ministry in July, but its deadline was pushed to the end of the year.

“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,” an official said to Quartz India, referring to the digital infrastructure on which cryptocurrencies are based. “The panel is also discussing amendment of the Currency Act to make possession of any cryptocurrency, not approved by the government, a punishable offense,” the official added.

This news has not been officially confirmed by any government entity or official. According to Nischal Shetty, the CEO of Indian cryptocurrency exchange WazirX, it would be great news for the cryptocurrency world, if true.

"It would also mean that the ban by RBI would be lifted before the Indian government can launch this else it would conflict with RBI news. All in all, if this news is true then that's a great sign for the Indian cryptocurrency ecosystem especially for an exchange such as WazirX as we'll see our growth being even more rapid than what it already is," Shetty told International Business Times.

However, the unnamed official also told Quartz India: “If a virtual currency is going to be backed by the government then it goes against the whole grain of such coins. These are essentially decentralized ledgers, and if the government or the RBI is trying to control it, then it loses its meaning."

It was reported in September that Securities and Exchange Board of India had sent representatives for a study tour to Japan, Switzerland, and the United Kingdom to understand digital assets and initial coin offerings. The central bank also revealed an interest in how other countries deal with digital currencies and included a mention of regulations in some countries, like Japan and China, in its Annual Report 2017-18, released late in August.

“In September 2017, Japan approved transactions by its exchanges in cryptocurrencies. China’s exchanges hosted a disproportionately large volumes of global Bitcoin trading until their ban recently,” the report said.

Zebpay, the Indian crypto exchange, shut down operations last week owing to the RBI's regulations that had "crippled" the exchange and its customer’s ability to transact business meaningfully.

India wouldn't be the first country to launch a government-backed cryptocurrency, were that to happen. In February, Venezuela launched its own cryptocurrency, Petro, backed by the country’s oil and mineral reserves and with the purpose of supplementing Venezuela’s crashing currency. Japan is set to launch its own cryptocurrency, J-Coin, ahead of the Tokyo Olympics in 2020. China has also been contemplating launching its cryptocurrency. The People’s Bank of China said in 2016 it was looking into the possibility of the digital currency, and that it could be introduced soon.