After a year of studying the cryptocurrency industry, an Indian governmental committee is tangled on the impact of the digital assets on the country’s fiat rupee, according to a Quartz report.
The Indian government set up a panel in November 2017 led by the country’s economic affairs secretary and ex-executive director at the World Bank Subhash Chandra Garg. The panel reportedly has reached the final stages of drafting a regulatory framework for the crypto sector operating in the country.
An unnamed representative of Indian crypto businesses, who’s claiming to have met with the members of the team, told Quartz: “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,” the person added.
According to Quartz, the year-old report released by the Basel-based Bank for International Settlements (BIS) might have forced the Garg-led panel to think about the crypto’s impact on rupee as the report showed concerns about the rise of virtual currencies which might destabilize the traditional banking system.
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The cryptocurrency community in the country, however, does not any threats to the fiat currency from virtual currencies, at least at this stage.
“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,” Rahul Raj, founder of Indian crypto exchange Koinex, told Quartz.
Steps Against Crypto
The Indian authorities made it clear that they do not view cryptocurrencies as legal tender. The final nail in the coffin was struck by the Reserve Bank of India as it barred all banks operating in the country from handling crypto business’ accounts.
Though the decision forced a few exchanges to move their base from the country, most of them introduced peer-to-peer transfers to circumvent the central bank’s decision.
“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,” Raj added.