The use of cryptocurrency as a payment method is a natural progression for fintech firms, but hurdles exist with regard to its application as an asset class and a substitute for money, according to Rajeev Chandrasekhar, minister of state for electronics and IT.
Cryptocurrency use as an asset and money alternative is difficult, according to a Union Minister
Speaking on the sidelines of the Fintech Festival, Chandrasekhar claimed that the issue of cryptocurrency is one that the entire globe is wrestling with and that solutions must be agreed upon.
"The use of cryptocurrency for payments is a natural progression of fintech, but all national currencies and regulatory bodies throughout the world are still unsure how to deal with the use of cryptocurrency as an asset class and a form of money. We'll navigate the situation with tact and care. We have a very specific goal in mind for who will use cryptocurrency in India. The government has stated that the RBI will create a digital rupee as a starting step before seeing how the market develops" said Chandrasekhar.
Finance Minister Nirmala Sitharaman has said that the RBI has expressed concerns over cryptocurrencies noting that they should be prohibited as they can have destabilising effect on the monetary and fiscal stability.
She said the RBI had registered its concern over the adverse effect of cryptocurrencies on the Indian economy.
The RBI mentioned that cryptocurrencies are not a currency because every modern currency needs to be issued by the central bank or the government, she said.
Furthermore, she added, monetary policy and their status as legal tender serve as the foundation for the value of fiat currencies. However, because the value of cryptocurrencies is primarily based on unfounded speculation and excessive return expectations, it will have a destabilizing impact on a nation's monetary and fiscal stability.
The Reserve Bank of India, on the other hand, is in the process of introducing the Central Bank Digital Currency (CBDC) for the wholesale and retail sectors.
According to Ajay Kumar Choudhary, Executive Director (Fintech), RBI, the introduction of CBDC was announced in the Union Budget 2022–2023 by Finance Minister Nirmala Sitharaman, and necessary amendments to the pertinent section of the RBI Act, 1934, have been made with the passage of the Finance Bill 2022.
The RBI can now run a pilot and issue the CBDC after the bill has been passed.
Although the CBDC is a digital currency, it cannot be compared to the private virtual currencies or cryptocurrencies that have exploded over the past ten years. Since there is no issuer, private virtual currencies do not represent any person's debt or liabilities.
By the beginning of 2023, India's official digital currency, which would resemble any of the present private company-run electronic wallets, is most likely to be introduced. The CBDC will be a digital currency backed by a government.
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