The Reserve Bank of India (RBI) has had it out for cryptocurrency in recent news, essentially issuing an all out ban on cryptocurrency trading in the country. There is currently a divide between the people of India and their government, with the former being pro cryptocurrency and the latter pro blockchain. The RBI in particular has been very anti-cryptocurrency leaving many to speculate as to why. This stance seems to have flipped as the RBI is exploring a central bank digital currency (CBDC), which is a sovereign FIAT pegged to a cryptocurrency, one that would be RBI backed.
ZyCrypto commented on the annual report of the RBI, clarifying the bank’s position to create a CBDC:
“According to the Bank’s 2017-2018 annual report published on Wednesday, a committee of members from different departments has been set up to look into the idea of a blockchain-based digital currency for in-country payments. The decision according to the RBI was necessitated by the unprecedented global changes in payment systems.”
RBI states in the report:
“The emergence of private digital tokens and the rising costs of managing fiat paper/metallic money has caused the need to explore a digital currency for the country.”
Continuing in the report, the RBI have commented:
“An inter-departmental group has been constituted by the Reserve Bank to study and provide guidance on the desirability and feasibility to introduce a central bank digital currency.”
This news could have been foreseen because at the start of 2017, a subsidiary of the RBI, the RBI Institute for Development and Research in Banking Technology (IDRBT) released a whitepaper that explored a multitude of blockchain research which hinted at the possibility of the RBI developing CBDC.
Currently India is awaiting to see if the high courts with the help of the RBI will come to a final decision concerning a complete ban on cryptocurrency as a whole. If the ban is finalized, then a CBDC backed by the RBI is more than likely to come around. If the high courts rule in favor of cryptocurrency then RBI’s plan for a CBDC will lose some of its standing. If the ban does come through, this will definitely have some effect on the crypto market.