In a move that was signaled in advance, the Indian government’s inter-ministerial committee (IMC) has submitted its report on the use of cryptocurrencies in India. The report recommends a ban on private cryptocurrencies. To enforce this, the panel recommends the use of punitive fines and a jail term of up to 10 years for users, traders and holders. The report says that the recommendation is due to the risks and price volatility associated with cryptocurrencies.
Opposite views
Billionaire Tim Draper, a major early Bitcoin investor and crypto bull was not impressed. Draper tweeted, “People behaving badly! India’s government banned Bitcoin, a currency providing great hope for prosperity in a country that desperately needs it. Shame on India leadership. Pathetic and corrupt.”
Taking the opposite view was outspoken Bitcoin skeptic, Nouriel Roubini, who praised the India government for wanting to protect its people. Roubini tweeted, "Good news for 1.4 bil Indians whose savings will not be suckered into 1000s of shitcoins that already lost 99% of their value from peak. Crypto is a massive driver of inequality: sleazy criminal whales getting rich at the expense of retail suckers. Inequality in crypto worse than NK."
The digital rupee
Despite the committee’s antagonistic view of private cryptocurrencies, the report took a more positive view of the underlying distributed-ledger technology (blockchain).
The report suggested various applications, especially in financial services, for the use of DLT in India. DLT-based systems can be used by banks and other financial firms for processes such as loan-issuance tracking, collateral management, fraud detection and claims management in insurance, and reconciliation systems in the securities market.
Finally, the report recommends that the India government consider an official Indian central bank digital currency. This would effectively be a digital rupee created by the Reserve Bank of India and a digital form of fiat money.
The report notes that a surge in technological innovation in the financial sector, the declining use of cash globally, and the emergence of new entrants in the payments sector are the factors driving the increased interest in CBDCs across the world.