NEW DELHI: The Centre has not received a proposal to recognise bitcoin as a currency in India, the government told Parliament on Monday, while adding that the Reserve Bank of India has recommended widening the definition of “bank note” for the launch of a Central Bank Digital Currency (CBDC).
Responding to a question on whether the government has any proposal to recognise bitcoin as a currency, finance minister Nirmala Sitharaman replied in the negative in Lok Sabha.
The statement came ahead of the introduction of a bill to “prohibit” all private cryptocurrencies, while providing certain exceptions to “promote the underlying technology” and its uses. The proposed legislation, planned for the current session of Parliament, will also create a “facilitative framework for the creation of official digital currency to be issued by the RBI”, the government had said last week, amid intense lobbying to “regulate” cryptocurrency, instead of banning them in India. Bitcoin is the most popular cryptocurrency globally.
Those supporting the demand for regulation have argued that it is tough to ban cryptocurrency, and the entire market will move to the Dark Net if the government moves ahead with the ban. The RBI has been leading the demand for a ban.
While replying to another question, junior minister for finance Pankaj Chaudhary told the lower house that in October, the RBI sent a proposal to the government to amend the law to widen the scope and definition of “bank note” to include currency in digital form.
“The RBI has been examining use of cases and working out a phased implementation strategy for introduction of CBDC with little or no disruption,” Chaudhary said.
The RBI has opposed the introduction of private cryptocurrency, arguing that it is prone to misuse and has no underlying asset from which it derives its value. Besides, it fears that private digital currency will result in dollarisation of the economy and significantly impact its ability to manage money supply, inflation, exchange rate. In contrast, it is looking to start work on CBDC over the next few months.
“Introduction of CBDC has the potential to provide significant benefits, such as reduced dependency on cash, higher seigniorage due to lower transaction costs, reduced settlement risk. Introduction of CBDC would also possibly lead to a more robust, efficient, trusted, regulated and legal tender-based payments option. There are also associated risks which need to be carefully evaluated against the potential benefits,” Chaudhary said in Parliament.
