India’s first official cryptocurrency has matured. Even as the Indian government appears to be warming up to blockchain technology. And even the idea of a central bank digital currency (CBDC). Private virtual currencies are still on the outs.
According to Subhash Chandra Garg, a former India’s first finance secretary. Once global central banks establish their own digital currencies. The vast majority of private digital currencies would vanish.
During the Business Standard Insight Out Summit on Oct. 22, Garg said, “The RBI (Reserve Bank of India). And the government would need to figure out how to allow the use of private coins. On crypto platforms that have their own system of value transfer “
“The India’s first private cryptocurrencies hurt government revenues in a way…the return on investments. That the crypto platforms can make from the currency delivered to them is not accrue to the government. Once the official digital currency comes in, most of the private cryptos and stablecoins will disappear,” he said.
Garg was the chairman of a high-level government commission. Tasked with investigating issues relating to virtual currency. As a result of years of anger toward digital tokens. A panel was formed in November 2017 and delivered a report 16 months later.
Meanwhile, the Reserve Bank of India (RBI) prohibited banks. From engaging in cryptocurrency-related transactions as of April 2018. In March 2020, the Supreme Court of the United States overruled the ruling. More than a year later, in May, the central bank published a statement. In which it recommended banks not to use the 2018 circular as a justification. For withholding services to cryptocurrency exchanges or investors.
Cryptocurrency and Regulation of Official Digital Currency Bill
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 (also known as the Crypto Bill). It is expected to be debated in the Indian parliament’s winter session. Which will take place in the coming weeks.
Amid these circumstances, Garg announced his voluntary retirement in July 2019. After being transferred from the finance ministry to the power ministry. During Prime Minister Narendra Modi’s second term in office.
How India can regulate blockchain-based services?
While blockchain technology itself cannot be regulated, the former bureaucrat stressed this week. That it is preferable to update or develop regulations to protect customers. Who use blockchain-based services.
“It may be prudent to introduce a Crypto Assets and Services Regulation Act. Similar to the Securities Contracts (Regulation) Act of 1956 (pdf),” Garg suggested.
He also sees the need for a “major overhaul” of the India’s first Contract Act, 1872. To include blockchain-based smart contracts, which are self-executing agreements. In which the buyer and seller agree on conditions that are directly encode into lines of code.
Smart contracts underpin most blockchain-based financial services, including trading, investing. Also by lending and borrowing. They result in significant cost reductions while also streamlining the operations. Customers benefit from simpler and safer transaction methods as well.
Garg divided blockchain technology’s application into three categories: currency, financial assets, and financial services.
“Many services, including finance, that were formerly given through. A centralized database system now delivered through a decentralized system.
“It (blockchain technology) is far more adaptable in that way,” Garg said.
Private cryptocurrencies such as bitcoin, on the other hand, cannot used as legal money. Because their prices are market-driven and have no fundamental worth, according to him.
Why should private cryptocurrencies be banned?
Due to a limited supply and great demand for bitcoin, one of the most prominent cryptocurrencies. Prices have skyrocketed in recent years. On Oct. 19, a bitcoin closed at $61,829. However, recent events such as Tesla entrepreneur Elon Musk’s critical views about cryptocurrencies. And China’s crackdown on crypto services have caused a drop in bitcoin values.
Such volatility undermines the concept of a stable, government-backed currency.
Mr. Garg advised the RBI to establish its own CBDC.
“There will be a lot of ambiguity, speculation, and volatility until the world establishes a way to value crypto. “That is the main issue,” Garg added, urging a global digital currency to facilitate international payments.
The use of CBDCs for international payments
Currently, cross-border payments are difficult, expensive, and time-consuming. Increasing credit and resolution risk for all parties.
Using CBDCs may be easier once shared worldwide standards regulate how multiple systems interact.
According to the Bank of International Settlements (BIS). Digital currency can facilitate faster and cheaper global money transactions.
BIS reports that the initiative generated a prototype. That also lowered cross-border transfer time from days to seconds.