There’s no easy victory in the country’s crypto cold war

India’s Pessimistic attitude towards Crypto currencies 

• The Reserve Bank of India (RBI) is pessimistic about the use of Cryptocurrencies in India. Consistently, the RBI had highlighted the disadvantages of using cryptocurrencies. 
• Further, in 2019, a high-level intermediate committee constituted by RBI recommended a blanket ban on private cryptocurrencies in India.  
• The pessimistic attitude towards digital currency has led banks, to distance themselves from the crypto community. For example, 

• In May, HDFC Bank warned its customers against virtual currency transactions.  
• Similarly, an RBI circular instructed all businesses to cease any involvement with cryptocurrencies. 
• Moreover, State Bank of India has also taken a tough stance on cryptos.  

Reasons for India’s Pessimistic attitude 

• Their prices are highly volatile, and they pose the risk of a financial bubble. 
• Anonymity in the usage that cryptos. it can serve as a safe transaction tool for cyber criminals. 
• Potential losses of revenue for the government since it is almost impossible to track crypto payments for any tax liabilities. 

Global Scenario 

• Globally, cryptocurrency acceptance has been growing. For instance, El Salvador has become the first country in the world to grant Bitcoin legal-tender status.  
• Also, countries like South Korea are implementing legislative frameworks to regulate cryptocurrencies and exchanges. 
• However, equally there are negative sentiments towards adopting Crypto currencies as a legal Tender. For example, former US President Donald Trump didn’t back Crypto currencies. 
• In India too, some pressure being mounted to acknowledge crypto currencies. For instance, RBI’s 2018 anti-crypto circular was struck down by the Supreme Court. Supreme court stated that RBI had failed to provide sufficient proof and detail over losses arising from crypto transactions. 

Consequences of India’s disposition towards Crypto currencies: Aggrieved investors 

• A research report by Bloomberg Intelligence has said that crypto’s technical outlook is strong and its price could surge to $400,000 in 2021. 
• Investors in India fear of missing the high profits that can be earned through crypto trading. 
• Many customers and crypto investors are taking to social media to express their discontent. 

India’s Position 

• India’s is trying to reduce the domestic cryptocurrency sphere to a state backed CBDC (Central Bank Digital Currency). 
• India is considering the imposition of an effective ban on ‘private’ digital assets and currencies by enacting the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021. 
• As an alternative to Crypto currencies, India is willing to introduce a central bank digital currency (CBDC). 

Way forward 

• The global experience suggests that a blanket ban would be ineffective, and India should consider regulating them to mitigate systemic risks. 
• Further, public consultation along with discussion, debate should be held among all stakeholders. 

If India’s cryptocurrency bill is enacted by Parliament in its current form, it would serve RBI’s objective. However, it won’t be a long-lasting and a pragmatic solution.