India’s central government has created an inter-disciplinary committee to examine existing virtual currency framework within the country and abroad. The committee will be chaired by the Special Secretary (Economic Affairs) and will include a diverse group of representatives from a number of government bodies including, but not limited to: the Reserve Bank of India (RBI), the State Bank of India, and Indian policy think-tank NITI Aayog. According to the release, the committee will conduct a comprehensive review of virtual currencies:
“The Committee will (i) take stock of the present status of Virtual Currencies both in India and globally; (ii) examine the existing global regulatory and legal structures governing Virtual Currencies; (iii) suggest measures for dealing with such Virtual Currencies including issues relating to consumer protection, money laundering, etc; and (iv) examine any other matter related to Virtual Currencies which may be relevant.”
The announcement comes within weeks after Minister of State for Finance Arjun Ram Meghwal stated the use of virtual currencies is not authorized as a means of exchange by the RBI, and after Deputy Governor Shri R. Ghandi suggested that confidence will only be placed in a virtual currency issued by an authority.
Since 2013 to recently in February, the central bank has repeatedly cautioned virtual currency users on the “potential financial, operational, legal, customer protection and security related risks” associated with virtual currencies. However, likely due to recent shocks in the economy, the Indian government may be changing its approach to virtual currencies, from merely issuing warnings to consumers about potential risks to proactively reviewing virtual currencies to tackle the risks they pose.
In November 2016, Indian Prime Minister Narendra Modi disrupted the entire Indian economy by announcing the demonetization of all 500 and 1,000 rupee banknotes. The move instigated an increased use of Bitcoin and provoked Indian officials to slam their gavels.
The formation of a virtual currency committee should clear up the Indian government’s shaky relationship with virtual currencies. The committee will submit a report of their findings within three months, and hopefully will consider Deputy Governor Ghandi’s words:
“The ‘confidence’ in [bitcoins] or for that matter any virtual currency based on blockchain or any other technology is also limited to its initial rounds and circles only; the initial rounds are always filled with adventurists and risk seekers; the moment masses get in, the riskavoiders get in, they will need greater ‘confidence’ for acceptance and that can come only if an ‘authority’ issues it.”