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.

Bitcoin Trading at $600 Premium in India as Potential Ban Looms

Bitcoin (BTC) is currently trading at a roughly $600 premium in India, according to the market price available on the rupee-based exchange BitBns.com.

At the time of writing, bitcoin trades for just under 8 lakh rupees, or 800,000 INR, which is nearly $11,500 - significantly more than the going dollar price of $10,860.

This extreme price premium can be attributed to the difficulty of buying crypto in the country. As of last year, all regulated Indian banks and financial institutions have been banned from transacting in, and offering services related to crypto.

But the environment could soon become even more hostile.

CryptoGlobe reported in late April that a government working group made up of Indian tax, consumer protection, and general economic ministries had recommended a complete ban on even transacting or owning cryptoassets, much less integrating them into the mainstream, legal economy.

Bitcoin Demand Strong in India?

BitBns, one of the few operational rupee-denominated exchanges remaining, has apparently been able to skirt the increasingly draconian environment by allowing users to conduct their own P2P market, facilitated by the website, in order to buy and sell in Indian rupees. Other popular Indian exchanges, like Coindelta, have been forced to shut down.

The high premium may suggest a healthy demand in India for bitcoin and other cryptoassets, as Indians without international banking connections are forced to use the local currency to buy crypto. Data from crypto analytics website Coin.dance show that another popular crypto-fiat P2P platform, LocalBitcoins, has seen a sharp uptick in Indian trading volume since March-April.

indialocalbitcoins.png(source: Coin.dance)

CryptoGlobe reported last month that volumes were not affected by, and even increased in spite of, the threat of a crypto ban.

Indian Government Measures

One recent instance in particular shows just how far the Indian government seems to be going to control the Indian economy.

In late 2016, the national government suddenly and without warning even to its own ministries, declared that all 500- and 1,000-rupee banknotes currently in circulation were null and void - in an action that is known in India as “Demonetization.” These notes represented more than half of the physical money then in circulation in the country.

While the stated aims of the action were to root out corruption and “black money” from the economy, Demonetization has often been panned as a disastrous failure that cost 1% of the country’s GDP, a loss of 1.5 million jobs, and hurt the poor most of all.