One of the reasons why India is yet to roll out a regulatory framework for the cryptocurrency industry is that a committee set up in 2017 to review the matter is at crossroads.
An unnamed source told QuartzIndia that the committee led by former World Bank Exec, Subhash Chandra Garg, fears that if the country stops its negative stance toward cryptocurrencies, then interest in the new currency could destabilize the Indian fiat currency, Rupees.
Such a scenario will mean that Indians will prefer to use cryptocurrencies as a store of value and means of exchange instead of keeping money and other valuables with local banks or transacting with fiat.
The source is quoted in the report as saying,
“If Bitcoin and other digital currencies are going to be allowed to be used for payments then whether it will end up destabilizing the fiat currency is a major concern for them [the committee].”
The source also acknowledged that a Bank for International Settlement (BIS) report in March 2018 to warn central banks against the dangers of mainstream usage of cryptocurrencies is fueling the fears of the committee.
So it is very likely that India will not legalize cryptocurrencies or roll out any regulatory framework, at least not until the committee agree that these new payment tools have not grown to a stage where they can destabilize a native fiat currency.
Right now, the committee believes that the “overall impact of (crypto usage) on the financial ecosystem is still unclear” and as such, they are don't appear ready to take any risk. Local banks have already been instructed to add “no crypto tags” to their terms and conditions.
The only likely result would be the development of stringent rules to govern the cryptocurrency industry as a top official stated in a December report.
Meanwhile, CEO of Indian crypto exchange, Koinex claimed in the current update that the fears of the committee are premature. He said that the time when cryptocurrencies will overtake fiat is still far away. In his exact words, “there is (a) considerable time before that concern even comes up.”
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