After an all out assault on cryptocurrencies in India by the central bank – The Reserve Bank of India (RBI) many speculated around why the RBI had decided to essentially bank cryptocurrency trading in the country. The issue in India is that the community are very pro cryptocurrency and the authorities are very pro blockchain. The RBI however, are very much against cryptocurrency, but nobody could really work out why.
Away from fraud, money laundering, ICO’s and all the other negative connotations that follow crypto, we were left to speculate on a notion that the RBI would be using this as an opportunity to explore and launch their own central bank digital currency (CBDC) a sovereign FIAT and cryptocurrency hybrid, backed by the RBI themselves.
In the RBI’s annual report, published this week, the RBI’s intentions to create a CBDC now seem to be far clearer than before. According to ZyCrypto:
“According to the Bank’s 2017-2018 annual report published on Wednesday, a committee of members from different departments has been set up to look into the idea of a blockchain-based digital currency for in-country payments. The decision according to the RBI was necessitated by the unprecedented global changes in payment systems.”
According to the report, the RBI believe that:
“The emergence of private digital tokens and the rising costs of managing fiat paper/metallic money has caused the need to explore a digital currency for the country.”
Furthermore, the RBI have commented:
“An inter-departmental group has been constituted by the Reserve Bank to study and provide guidance on the desirability and feasibility to introduce a central bank digital currency.”
Okay, this doesn’t come as a huge surprise. At the start of 2017, a subsidiary of the RBI, the RBI Institute for Development and Research in Banking Technology (IDRBT) actually released a whitepaper that detailed a wealth of blockchain research which in turn suggested the RBI could look into developing a central bank owned cryptocurrency, or in this instance, a CBDC.
It’s a strange time for cryptocurrency in India. As it stands, we are awaiting a final decision to be made in India with regards to their plans to ban cryptocurrency altogether. The high court are currently working with the RBI within this. As a result, if a total ban is passed (we expect a decision to be made in September) then, the production of an RBI CBDC is sure to happen. However, if (as we sort of expect) the high courts decide to overturn the RBI decision, the need for a CBDC may be reduced somewhat.
A lot is now riding on the outcome of the RBI’s initial ruling. Whilst we can’t tell yet what will happen, we need to prepare ourselves for what is to come, as, a total ban in India would be sure to have an adverse effect on the markets.
Something that we could do without, considering what’s happening within the United States and the Bitcoin ETF applications at the moment too.