9 Oct, 2019

RBI Puts its Cryptocurrency Launch Plans on Hold

Following the hubbub in the Indian parliament on cryptocurrencies and regulations, it has emerged that the Reserve Bank of India (RBI) has decided to keep its plans of launching a cryptocurrency, on hold.

If readers may recollect, last April the RBI had issued a diktat which stated that all Indian banks had to stop functioning as intermediaries between Indian cryptocurrency exchanges and traders. At the time, BP Kanungo, the Deputy Governor of RBI had said, “Regarding Ring-Fencing regulated entities from virtual currencies, digital tokens issued by private parties are getting international attention for quite some time, for their speculative value. Internationally, the regulatory response to these tokens are not uniform. It is universally failed that it is seriously undermine the airmail and FATF framework, adversely impact market integrity and capital controls. If they grow beyond a critical size they can financial stability as well. In the past RBI had cautioned on three occasions the members of public regarding the various risks they are undertaking by exposing themselves to cryptocurrency.”

He had added, “Staying on the digital currency, in response to the emergence of private digital tokens, all over the world several central banks are debating the possibility of introducing a fiat digital currency as opposed to the private digital tokens like the ones I just spoke about. These are issued by the central bank that constitute the liability of the central bank and they will be in circulation in addition to the paper currency that we have. It also holds the promise of reducing the cost of printing of the note. So recognizing this, we have constituted an inter-departmental committee in Reserve Bank of India which will product a report and they will explore the feasibility and desirability of issuing a digital currency by the Reserve Bank of India and to guide us in this matter in future.”

However, now the central bank has decided to not go ahead on its plans of introducing its own cryptocurrency. A source told news portal, Hindu BusinessLine, “The government doesn’t want the digital currency any more. It thinks it is too early to even think about a digital currency.”

This does not come as a complete surprise, as in the past the RBI has not been extremely forthcoming about what its purported department had found, despite the innumerable Right to Information (RTI) applications filed.