State Cryptocurrency Powered by Blockchain
In a significant endorsement of the underlying decentralized technology powering cryptocurrencies, the research arm of the central bank insisted that blockchain technology had “matured enough” to enable the digitization of India’s fiat currency, the rupee, into a digital currency. The white paper backing those notable claims was published in January 2017.
The RBI’s executive director confirmed research toward a ‘fiat cryptocurrency’ in late 2017 with reports of naming the token ‘Lakshmi coin’ after the Hindu goddess of wealth and prosperity.
The RBI is also developing a blockchain platform of its own to enable and support multiple commercial banking applications in the country. As detailed previously, the central bank has already determined various areas in banking, financial and registry services ripe for blockchain implementation.
India Bank Crypto Details
The Reserve Bank of India (RBI) has reportedly established a new internal unit dedicated to researching and regulating new emerging technologies, specifically cryptocurrency, blockchain and artificial intelligence (AI).
Holding back on a formal announcement, the RBI has discreetly formed a new unit to research and possibly supervise disruptive technologies through draft rules in the future, the Economic Times reported on Monday.
The unit has been operational for a month and already sees an as-of-yet unnamed general manager leading it, according to the report citing two sources aware of developments at the central bank.
One of the sources reported added:
“As a regulator, the RBI also has to explore new emerging areas to check what can be adopted and what cannot. A central bank has to be on top to create regulations. This new unit is on an experimental basis and will evolve as time passes.”
The development comes at a time when the central bank – after years of public caution against trading cryptocurrencies like bitcoin – said it was necessary to regulate the sector during a Supreme Court hearing in July this year.
Earlier in April, the RBI issued a circular to all regulated financial institutions – including banks – to forbid them from transacting or providing services to companies associated with cryptocurrencies. The effect of the mandate has had a crippling effect on domestic cryptocurrency trading and has seen crypto exchanges oppose the banking ban that is now a matter being contested at the Supreme Court.
Senior government officials – not directly associated with the central bank – who are part of a panel discussing regulations for the sector have ruled out a complete ban, insisting that cryptocurrencies are likely to be classified as commodities.