Crypto logical extension of fintech, its use as asset, currency a challenge

Cryp­to tech­nol­o­gy as a means of pay­ment is log­i­cal exten­sion of fin­tech com­pa­nies but chal­lenges lies on its usage as an asset class and an alter­na­tive to cur­ren­cy, Min­is­ter of State for Elec­tron­ics and IT Rajeev Chan­drasekhar said on Thursday.

Speak­ing on side­lines of Fin­tech Fes­ti­val, Chan­drasekhar said the whole world is grap­pling with the issue of cryp­to and has to come to an under­stand­ing on the ways and means to address it. 

“Cryp­to as a means of pay­ment is log­i­cal exten­sion of fin­tech but cryp­to as an asset class and cryp­to as a sub­sti­tute for cur­ren­cy is an area with which all cur­ren­cies of the world and all reg­u­la­tors of the world are strug­gling with. We will find our way with pru­dence, cau­tion. We have com­plete­ly clear objec­tive as to who will do cryp­to in India. The gov­ern­ment has said that RBI will do cryp­to the dig­i­tal rupee as first mea­sure and then we see how mar­ket evolves,” Chan­drasekhar said.

Finance Min­is­ter Nir­mala Sithara­man has said that the RBI has expressed con­cerns over cryp­tocur­ren­cies not­ing that they should be pro­hib­it­ed as they can have desta­bil­is­ing effect on the mon­e­tary and fis­cal stability.

She said the RBI had reg­is­tered its con­cern over the adverse effect of cryp­tocur­ren­cies on the Indi­an economy.

The RBI men­tioned that cryp­tocur­ren­cies are not a cur­ren­cy because every mod­ern cur­ren­cy needs to be issued by the cen­tral bank or the gov­ern­ment, she said.

Fur­ther, she said, the val­ue of fiat cur­ren­cies is anchored by mon­e­tary pol­i­cy and their sta­tus as legal ten­der. How­ev­er, the val­ue of cryp­tocur­ren­cies rest sole­ly on the spec­u­la­tions and expec­ta­tions of high returns that are not well anchored, so it will have a desta­bil­is­ing effect on the mon­e­tary and fis­cal sta­bil­i­ty of a country.

On the oth­er hand, The Reserve Bank of India is in the process of imple­ment­ing the Cen­tral Bank Dig­i­tal Cur­ren­cy (CBDC) in a phased man­ner for the whole­sale and retail segments.

The intro­duc­tion of CBDC was announced in the Union Bud­get 2022–23 by Finance Min­is­ter Nir­mala Sithara­man and nec­es­sary amend­ments to the rel­e­vant sec­tion of the RBI Act, 1934 has been made with the pas­sage of the Finance Bill 2022, said Ajay Kumar Choud­hary, Exec­u­tive Direc­tor (Fin­tech), RBI.

The pas­sage of the bill has enabled the RBI to con­duct a pilot and sub­se­quent issuance of the CBDC.

The CBDC is a dig­i­tal or vir­tu­al cur­ren­cy but it is not com­pa­ra­ble to the pri­vate vir­tu­al cur­ren­cies or cryp­tocur­ren­cy that have mush­roomed over the last decade. Pri­vate vir­tu­al cur­ren­cies do not rep­re­sent any per­son­’s debt or lia­bil­i­ties as there is no issuer.

Indi­a’s offi­cial dig­i­tal cur­ren­cy is like­ly to debut by ear­ly 2023, which will mir­ror any of the cur­rent­ly avail­able pri­vate com­pa­ny-oper­at­ed elec­tron­ic wal­lets. The CBDC will be a sov­er­eign-backed dig­i­tal currency.

(Only the head­line and pic­ture of this report may have been reworked by the Busi­ness Stan­dard staff; the rest of the con­tent is auto-gen­er­at­ed from a syn­di­cat­ed feed.)

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