A panel under India’s finance ministry tasked to propose regulations for cryptocurrencies like bitcoin is reportedly set to recommend a state cryptocurrency backed by the government, instead.
Citing a senior official aware of discussions within the inter-governmental panel, Quartz is reporting that the group is set to suggest the development of a state crypto token on a blockchain developed by the government.
“We are evaluating the government-backed cryptocurrency and crypto-token,” Quartz cites the ‘senior government official’ as stating. The panel will also recommend the government to conduct its own research and development of the blockchain, the official added.
A Central Bank Digital Currency
The development comes at a time when the central bank has admitted to exploring a central bank-issued digital currency.
While reports of an internal unit at the central bank dedicated to cryptocurrency and blockchain research have been refuted by the Reserve Bank of India (RBI), the central bank confirmed the formation of an ‘inter-departmental group’ tasked to study the “feasibility to introduce a central bank digital currency (CBDC)”, in its Annual Report 2017-18.
The RBI’s research arm, in early 2017, published a sweeping whitepaper courtesy of India’s foremost banking research institute to plainly conclude that blockchain technology had “matured enough” to enable the digitization of the rupee, India’s fiat currency.
As CCN reported in August, any state-backed digital currency issued by the central bank will be valued as the digital equivalent of the Indian rupee.
It was September 2017 when RBI executive director Sudharshan Sen first hinted at a “fiat cryptocurrency.”
“Right now, we have a group of people who are looking at fiat cryptocurrencies,” the senior central bank official said at the time. “Something that is an alternative to the Indian rupee, so to speak. We are looking at that closely.”
Officials have also discussed the possibility of naming the cryptocurrency “Lakshmi”, after the Hindu goddess of wealth and prosperity.
The official’s revelation came a little over a year after the Indian government enforced a controversial ban on denominations of physical cash to render 90% of India’s currency notes obsolete overnight. Following the unprecedented demonetization run, the central Indian government has since announced the “Cashless India” initiative as a pivot to digital payments in the everyday economy.
India’s effort to develop the ‘Lakshmi Coin’, if true, will follow the likes controversial Venezuelan crypto token ‘petro’. Backed by the country’s large oil reserves, the petro is the world’s first state cryptocurrency. Born out of a need to evade U.S.-led financial sanctions, the petro could soon be followed by Iran with its own indigenous state cryptocurrency.