India May be Worried That Cryptocurrencies Could Hurt Fiat Currency

The blockchain seems to have captured the hearts of many businessmen and politicians around the world. The ways in which this technology solves problems related to transparency, trust, and speed of data transmission is extremely attractive for the development and optimization of many processes in several industries, however, when it comes to the use of cryptocurrencies, the story is very different: Many consider that they will fall into disuse and even some actors believe that they can destabilize the “world order”.

Subhash Chandra Garg. Head of the Committee in charge of drafting crypto regulations in India

Subhash Chandra Garg. Head of the Committee

As QZ reports, India is giving its first signs of serious concern regarding the use of crypto in a widespread situation. A high-level committee tasked with drafting rules for India’s virtual currency ecosystem has indicated that if the adoption continues to increase in India, the negative impact on the use of the Indian Rupee could have significant negative consequences.

A source who asked to remain anonymous commented that there is a concern in the committee that cryptocurrencies could destabilize the country’s monetary performance.

“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 Garg panel) … The overall impact on the financial ecosystem that it is likely to have is still unclear, and it has been a challenge to convince them on this particular point.”

The government of India has maintained an anti-crime policy, particularly on the part of the RBI. Recently, it was reported that several banks in the country informed their clients that if they found out that they participated in some kind of activity related to cryptocurrencies, their accounts could be canceled.

A Different Perspective

Despite the situation, other actors label the attitude of the government as exaggerated. In order to reach a level at which there is real competition for fiat, cryptocurrency should gain a massive adoption. One of those defending this thesis is Rahul Raj, founder of Koinex, an Indian cryptocurrency Exchange who commented:

“At this point, it may be a bit premature to worry about this as right now even globally only a handful of payments are made using virtual currencies and that will be the case till blockchain reaches the scale that say Mastercard or Visa have … therefore, there is (a) considerable time before that concern even comes up.

Until now the official pronouncement of the committee led by Mr. Subhash Chandra Garg is not known; however, it is possible that a report of this type will result in an even more restrictive policy about cryptocurrencies.