The twisted tale of the Cryptocurrency is back in the news. With the government planning to launch the proposal for banning these digital assets, let us look upon the events as they unfolded for the same and how it may be a precursor to the launch of Central Bank Digital Currency (a cryptocurrency) backed by the RBI.
Crux of the Matter
The Proposed Bill
The cryptocurrency and Regulation of Official Digital Currency Bill, 2021.
- Establish a framework for creating Official Digital Currency issued by the RBI.
- Seeks to ban all private cryptocurrencies.
- Exempted for the usage of crypto technology.
The Dilly Dallying Timeline Of Crypto Ban
- 2018: The RBI banned cryptocurrency transactions and mandated all the banks to stop dealing with cryptocurrencies.
- 2019: The GOI panel too banned all the cryptocurrencies. A prison term of 10 years was established for individuals dealing in digital currencies.
- 2020: The Supreme Court overturned the Central bank’s order terming it to be disproportionate.
- 2021: The GOI proposed the bill in the lower house for banning the cryptocurrency.
How Would RBI Develop Its On Crypto?
- Step 1: A Central Bank Digital Currency (CBDC) would be backing RBI and in turn, the government.
- Step 2: The Indian Rupee bills would be then converted into digital format.
- Step 3: These digital bills would be issued and backed by the RBI.
- Step 4: Further making it as an alternate currency for transactions.
Central’s Rationale For Ban
- Price fluctuations.
- The risk to consumers.
- Criminal activities cannot be traced
- An enormous amount of power consumption required for a single transaction.
There’s no such thing as a private cryptocurrency. Crypto by their very nature are decentralized and public.Niscal Shetty, Founder Of WazirX
Crypto assets are more like alternate govt. Issued legal tender. Govt’s digital currency and cryptocurrency can coexist.Rahul Pagidipati, CEO, Zebpay
Read more about cryptocurrency here.
- China has started its own digital currency called e-RMB. When made publicly available, it will be the world’s first state-backed digital currency.
- RBI was conceptualised as per the guidelines, working style and outlook presented by Dr B. R. Ambedkar in his book titled “The Problem of Rupee – Its origin and its solutions” and presented to the Hilton Young Commission. Eventually, the Central Legislative Assembly passed these guidelines as the RBI Act 1934.
- The central bank founded a subsidiary company—the Bharatiya Reserve Bank Note Mudran Private Limited—on 3 February 1995 to produce banknotes. The company operates in Indian and global markets, catering to security document needs of Central banks and monetary authorities of the world by designing, printing and supplying banknotes