Will RBI launch its own fiat digital currency?
Following its bi-monthly Monetary Policy Statement, the Reserve Bank of India said it would explore launching a digital fiat currency and would take a decision on the same by June-end.
The Reserve Bank of India (RBI), following the bi-monthly Monetary Policy Statement on Thursday, said it would, with immediate effect, ban all regulated entities from dealing with or providing services to any individual or business dealing with or settling virtual currencies.
It added that regulated entities that already provide such services will have to exit these operations within a specified time and a circular in this regard will be issued shortly.
The central bank also said that in light of the emergence of private digital tokens and rising costs of managing fiat paper and metallic money, central banks around the world are exploring fiat digital currencies and it would explore the same.
“... an inter-departmental group has been constituted by the Reserve Bank to study and provide guidance on the desirability and feasibility to introduce a central bank digital currency. The report will be submitted by end-June 2018.”
Taking a tough stance on crypto currencies, including Bitcoin, the RBI said,
“Reserve Bank has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies. In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs.”
In the Union Budget for 2018-19, Finance Minister Arun Jaitley had said the government does not consider cryptocurrency as legal tender, and would take all measures to eliminate the use of such assets in a move to crack down on financing illegitimate activities.
Consequently, operating a cryptocurrency business has gotten tough as it was reported back in January that the Ministry of Corporate Affairs has stopped registering any cryptocurrency exchange. Also, leading banks in the country withdrew support for any crypto assets, suspending accounts and removing payment options from major crypto exchanges.
Banks including HDFC Bank and State Bank of India have stopped supporting cryptocurrency-related transactions while using their cards.