Cryptocurrencies like Bitcoin are not just risky to the individuals that invest in them, in some ways they do post great risk to agencies and groups outside of the investor space, such groups include governments and central currency providers, such as central banks for example. Of course, we know as a part of the cryptocurrency community that these risks are far outweighed by the benefits of cryptocurrency, though sadly many central agencies haven’t work this bit out just yet.
A new article by Quartz India discusses how the Indian government believe that Bitcoin could eventually destabilize the Rupee, India’s own sovereign currency. We should remind you that India has got a bit of a bumpy recent history with Bitcoin, as the Reserve Bank of India (India’s Central Bank) made moves in 2018 to totally ban cryptocurrency. In all honesty, the industry in India hasn’t yet recovered from this.
According to Quartz, a panel within the Indian government. Led by Bureaucrat Subhash Chandra Garg are currently worried that if Bitcoin and other cryptocurrencies are accepted as currencies for payment in India, the rupee will become unstable. A member of the panel has said:
“If bitcoin and other digital currencies are going to be allowed to be used for payments then whether it will end up destabilising the fiat currency is a major concern for us. The overall impact on the financial ecosystem that it is likely to have is still unclear and it has been a challenge to convince them on this particular point.”
Rahul Raj, the founder of Koinex has responded to the comments made by the panel:
“At this point it may be a bit premature to worry about this as right now even globally only a handful of payments are made using virtual currencies and that will be the case till blockchain reaches the scale that say Mastercard or Visa have. Therefore, there is considerable time before that concern even comes up.”
The government are simply worried that Bitcoin adoption will drive people in the country away from spending the Rupee, eventually leading to the redundancy of the FIAT currency. As Raj rightly states though, this is a very extreme circumstance and that the worldwide evidence shows that even when Bitcoin is highly adopted, payments through the likes of Mastercard and Visa still reign. In essence, it would take an awful lot for Bitcoin to destabilize the Rupee so early into the life of Bitcoin - there’s a very long way ahead of us before Bitcoin has any chance of doing this.