Indian authorities have recently revealed that the country has been exploring tokenized datasets and other cryptographic forms of blockchain technology albeit while still maintaining their rather unfavorable stance towards cryptocurrencies citing their potential role in unlawful activities such as money laundering. As such, the prevailing ban on cryptocurrencies is likely to continue regardless of the government’s interest in issuing digital tokens for financial transactions.
“There are lots of issues that need understanding and lots of studying needs to be done,” a government official who requested to remain anonymous said. “Blockchain is an interesting thing. We definitely want to milk it effectively for financial transactions. So all officials are really trying hard to understand how to separately use blockchain, without cryptocurrency. And understanding a new software takes time.”
According to local Indian news outlet, DNA India, the country’s government have been considering the applications of crypto tokens in several different areas. However, as clarified by the new outlet, the government has excluded any use of cryptography and blockchain technology for the purposes of cryptocurrencies or any other sophisticated means of money transfer and international transactions. In fact, the officials believe that the crypto-tokens, including the ones they are exploring, do not themselves hold any inherent value. Instead, they represent an underlying asset that is only accessible to the private key holders. This implies that the crypto tokens will certainly not be serving as a substitute for fiat currency but will be representing an underlying value so as to enable faster and more transparent payments.
“One will need to pay physical money to buy a token which could be stored as a code in any basic mobile feature phone. It can even be used for remittances. So, it is easy to implement from technology as well as a regulatory point of view. But in the case of cryptocurrency, one needs to allow it as a legal tender first,” the DNA India report explained.
Spearheaded by a Committee
India’s finance ministry has since set up a committee headed by the secretary of the Department of Economic Affairs (DEA) for this initiative. The committee has been tasked with working on a set of regulations and a roadmap to guide the use of the proposed assets in India. A drafty of these regulations, once drafted, will be forwarded to the country’s parliament for further approval.
“The committee is studying the possibility of using cryptocurrencies or crypto technology (distributed ledger technology) for financial transactions and also what kind of regulations are needed for that [while] the currency is totally banned, the committee is discussing its other uses and how it can be mainstreamed in India,” Subhash Chandra Garg the DEA secretary, who is heading the committee, said.