The risk and instability associated with cryptocurrencies over the last decade have managed to keep a rapid pace with its popularity and growth. From the incident at Mt Gox exchange, where over 850,000 bitcoins were stolen, to the recent coalition with terror financing, cryptocurrencies have had their fair share of despondency. India is relatively new to the crypto universe and now a high panel has been assigned with the responsibility of drafting regulations regarding India’s virtual currency ecosystem.
According to a report on Quartz, Subhash Chandra Garg, Economic Affairs Secretary of India, who is leading the committee, is believed to be unsure of the repercussions digital currency will have on the fiat currency [INR] of the country if it is legitimized to make payments across the subcontinent.
The Indian government has also raised it’s concerned and consistently held a stance that it is not comfortable with virtual currencies, even though the common consensus is to push forward to promote blockchain technology, a decentralized public ledger for cryptocurrency transactions.
One of the cryptocurrency ecosystem representatives [who requested anonymity] recently met up with the ministers and stated:
“If bitcoin and other digital currencies are going to be allowed to be used for payments, then whether it will end up destabilizing the fiat currency is a major concern for them [the Garg panel]. 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.”
Bank of International Settlements [BIS] based in Basel, Switzerland, recently released a report which further heightened the doubts regarding the introduction of cryptocurrency in the system. The report stated that digital currencies can possibly be regularized by policymakers for settling payments among financial institutions, but there is a general concern that digital coins might destabilize traditional banks if they are offered widely to the general masses. However, the crypto enthusiasts believe that such negative prospects might not arise in the near-term.
Rahul Raj, founder of Koinex, an Indian cryptocurrency exchanged, stated:
“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 of say Mastercard or Visa have, therefore, there is a considerable time before that concern even comes up.”
The Indian government had made it clear on several occasions that it does not recognize these new-age coins as legal tender and is unlikely to do so due to concerns regarding money laundering or other fraudulent transactions which can be used to con gullible investors.
Rahul Raj also added:
“You can’t buy goods and services in India using any other currency such as the dollar, pound or even gold and it needs to be converted first into rupee to complete payments, a stance that can also be adopted for cryptocurrencies.”