I’ve noticed a few reports this morning that quote the RBI, the Reserve Bank of India in what looks like a storm of allegations battling a storm of pro-cryptocurrency propaganda.
Here are some examples of the headlines I have discovered, published just hours apart from each other-
‘RBI May Introduce its Own Version of Digital Currency’
‘Cut All Ties with Bitcoin, Cryptocurrencies; RBI tells Banks, Financial Institutions’
‘RBI-regulated Entities Barred from Dealing in Cryptocurrencies’
‘RBI to Study Introduction of Central Bank Digital Currency’
Forgive me if I’m wrong but I detect a little contradiction here, how can one bank be accused of both rejecting and supporting cryptocurrency, at extreme levels, all within a couple of hours?
Let’s look at the bigger picture in India at the moment, according to a study by Thomson Reuters, India is a nation ‘on the fence’ about cryptocurrency, Bitcoin is widely used there but at present there are no direct laws that inhibit cryptocurrencies in any way. We do know however that the Government are less favourable towards cryptocurrencies than other regions and that one day, India are expected to implement tight regulations on cryptocurrency use in the country.
With that in mind, it seems unlikely that the Reserve Bank of India would want to introduce a cryptocurrency into their central banking system. Yet according to the Times of India, a report from the RBI about a central digital currency is due to be published by the end of June this year.
Now interestingly, this report by the Times of India also recognises the RBI’s cautioning of people who use Bitcoin and other cryptocurrencies. According to Financial Express, the Deputy Governor of RBI, BP Kanungo has said:
“All the entities regulated by the RBI should cut ties with any individual or businesses dealing with virtual currencies. Any such entity that deals or provides services to such businesses has to exit the relationship within three months.”
So, it does look like the RBI are serious about stopping their businesses and customers using cryptocurrencies, this works inline with the overall outlook of cryptocurrencies by the government in India.
So why on earth would the RBI want to design their own centralised cryptocurrency? Why not make the most of the technology that already exists and encourage the use of Bitcoin etc?
What’s happened here, in my opinion is that news outlets have piggy backed on a bit of a hype about the RBI and have made two separate statements look like contradictory battles, so, here’s my take on what’s going on. This is informed by my own research but obviously, I could be wrong.
The generation of a central cryptocurrency for use within the RBI would only be successful if their partners, customers, businesses and ‘entities’ only used their currency. Let’s call it RBICOIN for examples sake. In order to successfully launch RBICOIN and most importantly, moderate RBICOIN then the likes of Bitcoin need to be abolished.
Not only could the bank and the government profit from RBICOIN but they could also be seen as a forward-thinking community, pushing the idea of a safe cryptocurrency, meaning more customers would want to get involved in it, boosting the reputation of RBI and its new coin.
So, by taking steps to start the removal of affiliations with Bitcoin, RBI will find it much easier to launch their new coin with great impact.
To be honest, that’s the only way I can make any sense of this saga. Perhaps I’m over thinking it and actually neither sides of the story are accurate. If that’s the case then sorry for wasting your time but I do think something interesting is happening here and maybe, the Reserve Bank of India are using very controversial techniques to open up a new market for themselves.