India's Central Bank May Be Giving up on a 'Crypto-Rupee', Report Claims

The Reserve Bank of India (RBI), India’s central bank, has reportedly shelved plans to launch a central bank digital currency (CBDC) for now, as it “doesn’t want the digital currency” anymore, believes it’s “too early to even think about a digital currency.”

According to local news outlet The Hindu Business, unnamed sources have revealed India’s central bank is no longer looking to launch its own CBDC, but may instead be looking at what other developed countries do, as it doesn’t “have a formal unit for tracking of, and policy-formation on” cryptocurrencies and blockchain technology.

The news outlet’s source was quoted as saying:

The government doesn’t want the digital currency any more. It thinks it is too early to even think about a digital currency.

The RBI initially revealed it was looking into the possibility of launching a cryptocurrency in April of 2018, when it established a group to look into its potential advantages. Reportedly, its idea would be to better control money laundering and cybersecurity threats, among others, through its CBDC.

As CryptoGlobe covered, in October a private panel with India’s finance ministry revealed high ranking officials were considering a national cryptocurrency, although not every official agreed such a token would be a step forward for the country.

Per The Hindu Business the founder of crypto exchange Belfrics, Praveen Kumar, noted that it’s too early for the RBI to “launch [a] crypto-rupee” as more understanding of the cryptocurrency economy is required. Waiting to see how it evolves, he said, is the “right decision.”

Kunal Nadwani, the CEO of uTrade Solutions, claimed government throughout the world will “launch fiat cryptocurrencies, whether out of compulsion or choice,” adding that the ability to tax their citizens in whichever token they choose lets them create fiat-currency based cryptos. Per his words, however, “it will take time before central banks are able to make this transition.”

Notably, local media have also recently reported that an interdisciplinary committee set up by the Indian government is looking into regulating and legalizing cryptocurrencies in the country, although with tough terms and conditions.

Last year, India’s RBI notably used a circular that ordered commercial banks to stop dealing with cryptocurrency-related firms. The move, as CryptoGlobe covered, saw one of India’s largest exchanges by trading volume, Zebpay, shut down.

At the time the crypto community fought back, and saw a missive from the country’s supreme court uphold the RBI’s decision. In late October, the supreme court even asked the government to clarify its stance on cryptocurrencies.

Unregulated Crypto Derivatives Exchanges Dominate Regulated Alternatives

Trading volume on unregulated Bitcoin (BTC) derivatives exchanges is growing rapidly, and continuing to far outpace their regulated-institutional counterparts, according to the most recent (March) CryptoCompare Exchange Review.

unregulated exchange volume(source: CryptoCompare)

Both OKEx and bitFlyer exchanges hosted an average daily derivative trading volume worth well over a billion dollars during March - $1.5 billion and $1.14 billion respectively according to CryptoCompare. It seems then that the older derivative stalwart BitMEX, at $645 million daily average volume, has been rapidly eclipsed by the newer exchanges.

regulated exchange volume(source: CryptoCompare)

Institutional, fiat-dealing (regulated) exchanges hosted a fraction of this volume, the highest being $70.5 million on the CME exchange. CryptoGlobe reported last month the CME’s primary competitor, the CBOE, was shuttering its Bitcoin futures products citing low demand. CME volume spiked last month, but is down this month below to January levels.

However, despite the relatively low average volume, the CME did have one bumper day of record-breaking Bitcoin futures trading volume, trading nearly $550 million worth of bitcoin on April 4th - days after Bitcoin’s unbelievable breakout from its $4,200 resistance.

Outflanked

The ease of onboarding new customers may explain why the unregulated exchanges get more attention.

In a recent interview, BitMEX CEO Arthur Hayes underlined his exchange’s ability to “onboard a [new] customer within 10 minutes,” by accepting Bitcoin and only Bitcoin for funding. In addition, no KYC/AML checks are required to trade on BitMEX, merely an email address; whereas OKEx offers margin trading only after basic KYC/AML checks. These exchanges are registered in Seychelles and Malta, respectively, specifically to avoid such onerous accounting requirements for their customers.

As CryptoGlobe covered early in 2019, however, BitMEX and other derivative exchanges including OKEx officially exclude certain citizens from trading on their platforms due to regulatory concerns, most notably US citizens.

Hayes also intimated at the upcoming launch of an interest bearing Bitcoin-only bond, which he speculated could be used to leverage credit into future Bitcoin-denominated economic activity.