India Might Launch Its Own Cryptocurrency After Restricting Use of Bitcoin
The government of India has made moves to restrict cryptocurrency exchanges in the country. Despite those moves, however, India’s government may be preparing to launch its own cryptocurrency.
That news comes from Quartz India. Over the last year, a panel of Indian financial experts has been meeting to discuss recommendations for the financial future of India. According to an inside source, that panel is preparing to recommend that India launch a government-backed cryptocurrency.
“We are evaluating the government-backed cryptocurrency and crypto-token,” explains a senior government official knowledgeable of the panel’s discussions, as quoted by Quartz India.
“And we are looking to develop and encourage our own research and development of blockchain technology.”
The panel was first established by India’s financial ministry in December 2017 with the goal of establishing regulations for cryptocurrencies. That panel was supposed to submit its first report in July 2018, but the deadline was later pushed to December.
It’s not crazy to think that the government of India could launch its own cryptocurrency. The Royal Bank of India has previously hinted about launching its own cryptocurrency.
Back in April, for example, the Royal Bank of India (RBI) established “an inter-departmental group to study the feasibility of a digital currency backed by the RBI,” according to Quartz India. That digital currency would exist in addition to India’s existing paper currency.
In other words, there are growing signs that the government of India is preparing to launch its own cryptocurrency.
How Would A Government-Backed Indian Cryptocurrency Work?
The panel is currently discussing how a government-backed cryptocurrency might work.
We’ve seen other governments establish their own cryptocurrencies. Venezuela, for example, created its own cryptocurrency called the Petro, backed by oil reserves in the country.
Some argue that government-run cryptocurrencies go against the nature of cryptocurrencies. You’re introducing governmental centralization into a decentralized ecosystem. You’re losing the key, unique advantages of cryptocurrency.
There’s another problem: if a government rolled out its own cryptocurrency, then why would it permit other cryptocurrencies to be traded? Wouldn’t a government ban cryptocurrencies like bitcoin in this situation?
There are signs that India is positioning itself for such a move:
“The panel is also discussing amendment of the Currency Act to make possession of any cryptocurrency, not approved by the government, a punishable offense,” said the government official quoted above.
The Royal Bank of India Has Already Taken an Unfriendly Stance Towards Bitcoin
If the government of India does launch its own cryptocurrency, then it’s certainly possible – even likely – that the government would ban bitcoin and other cryptocurrencies on top of that.
The Royal Bank of India has already come down heavily on bitcoin. In July, the country’s central bank announced that it was barring banks from maintaining any business relationships with cryptocurrency exchanges and traders.
Overnight, banks in India were forbidden from dealing with cryptocurrency exchanges or cryptocurrency traders.
This decision has reportedly had a devastating effect on cryptocurrency trading in India. Cryptocurrency exchanges in the country were adding 300,000 customers per month last year. Today, they’re adding about 1,500 to 3,000 customers per month.
India’s largest cryptocurrency exchanges, meanwhile, continue to fight back against the ruling. The case reached the Supreme Court of India in May, with cryptocurrency exchanges arguing to overturn the ban.
All of this has led to catastrophic consequences for India’s crypto ecosystem. Zebpay, one of India’s largest and best-known cryptocurrency exchanges, shut down.
The India-Backed Cryptocurrency Could Be Called Lakshmi
The Royal Bank of India is reportedly preparing to launch its own digital currency called Lakshmi.
Lakshmi is the Hindu goddess of wealth. That cryptocurrency would exist in addition to the paper currency used in India.
One of the main benefits of such a cryptocurrency, from the RBI perspective, is that it would reduce the cost of printing notes.
Will the government of India launch its own cryptocurrency and ban other cryptocurrencies? Will crypto exchanges continue to be restricted in the country? Will the Royal Bank of India launch a Petro-like digital currency similar to Venezuela? We’ll have to wait to find the answer to all of these questions.