Cryptocurrency issue: No plan to use Bitcoin as currency: FM
[ad_1]
Read More/Less
The government has no plan to recognise Bitcoin as a currency in the country, Finance Minister Nirmala Sitharaman informed the Lok Sabha on Monday.
Meanwhile, in response to another question, the Finance Ministry said that Reserve Bank of India has urged the Centre to amend RBI Act 1934 to widen the definition of bank notes to include digital currency. This will facilitate introduction of Central Bank of Digital Currency (CBDC).
Crypto Bill
When asked whether the government has any proposal to recognise Bitcoin as currency, Sitharaman said in written response ‘no sir.’ The response comes at a time when the government is planning to introduce a Bill in the ongoing session to regulate cryptos in India.
In response to another question, Minister of State in the Finance Ministry, Pankaj Chaudhury, said in a written reply: “The government has received a proposal from Reserve Bank of India (RBI) in October, 2021 for amendment to the Reserve Bank of India Act, 1934 to enhance the scope of the definition of ‘bank note’ to include currency in digital form.”
It is believed that the RBI’s request will be incorporated in ‘The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’, proposed to be introduced during the current session. According to Lok Sabha Bulletin, purport of the Bill is “to create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India”.
Cryptocurrency, CBDC and the RBI Act
Further, he mentioned that Central Bank Digital Currency (CBDC) is introduced by a cntral bank. The RBI has been examining use cases and working out a phased implementation strategy for introduction of CBDC with little or no disruption.
“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,” he said while admitting that there are also associated risks that need to be carefully evaluated against the potential benefits.
The RBI has already indicated about doing a pilot of its CBDC in the first quarter of the next fiscal year. The CBDC could have a much larger impact on the financial ecosystem, according to industry experts.
While many see CBDCs as a legalised replacement of cryptocurrencies, in reality, CBDCs could just be a digital replica of the physical cash in circulation. According to a 2021 BIS survey, quoted in the RBI report, 86 per cent of the central banks surveyed are actively researching the potential for CBDCs, 60 per cent were experimenting with the technology, and 14 per cent were deploying pilot projects.
RBI may pilot digital currency in Q1 of FY23
A major use case for CBDCs will likely be in the insurance and lending space and also for managing non-performing assets. Using digital currencies will bring in more transparency and traceability across levels for the financial services sector, according to experts.
[ad_2]