Nirmala Sitharaman, India’s minister of finance, acknowledges the relevance of cryptocurrency, but she thinks the country has to consider its own peculiarity in relation to cryptocurrency.
El Salvador, a Case Study on Cryptocurrency
She cited El Salvador as an example of the impact of a change in policy on cryptocurrency. El Salvador accepted bitcoin as a legal tender, and this led to protests against adoption of cryptocurrency in the country. She thinks this is proof that the public cares about government policy on cryptocurrency. She doesn’t think it is a matter of literacy or understanding, it is rather a question of the transparency and availability of the digital currency for everyone.
Furthermore, she does not think that India is ready to follow the footstep of El Salvador, though cryptocurrency would not be shut out. El Salvador’s Legislative Assembly passed the Bitcoin Law on 8th of June 2021. This officially made bitcoin a legal tender within the country. President Nayib Bukele was quite instrumental in the decision.
Crypto regulations, and how to manage it, has been an issue countries are dealing with at the moment. The legal status of cryptocurrency in India is not clear, as the country is yet to adopt a clear stance. The country is consulting various stakeholders and a new committee was set up to examine the cryptocurrencies and the possible effect on the India economy. This committee would provide a recommendation that may range from blanket ban to legalization of cryptocurrency as a legal tender.
A similar committee was established in 2017 to study cryptocurrency and consult relevant organizations. The recommendation of the 2017 committee was a blanket ban on cryptocurrency and various penalties which includes jail time. Whether the new committee will agree with the recommendation of the 2017 committee is unknown at the moment.
According to Nirmala Sitharaman, a draft bill on cryptocurrency is already available, though awaiting approval from the union cabinet. If approved, the bill will be discussed in the parliament and a decision will be made. Information about the bills is currently not available for public discourse, the content and details of the bill is yet to be revealed. If cryptocurrency will be banned or not, is a mystery at the moment.
If the country chooses to adopt cryptocurrency officially, will India have its own Central Bank Digital Currency?. Central Bank Digital Currency is being developed by countries such as Hong Kong, Australia, European Union etc. Australia recently announced it would launch a digital currency. This is in contrast to its earlier stance against developing Central Bank Digital Currency.
Last month, RBI governor Shaktikanta Das said that India may launch a trial of its own Central Bank Digital Currency. He advised caution in the implementation of the Central Bank Digital Currency because it is a new product that is yet to be fully tested both in the country and globally. Nirmala Sitharaman thinks that a careful decision is needed to decide if India should have its own CBDC.