Beleaguered by so-called ‘black money’ and tax evasion, the Indian government is planning to issue its own fiat cryptocurrency according to recent news reports.
It’s been almost a year since the Indian government decided to take harsh measures against “black” money and tax evasion. On November 18, 2016, the Indian government removed their two highest value banknotes from circulation, effectively removing 22 billion banknotes from the country’s monetary system.
With many people fearing for their savings, they resorted to cryptocurrencies in order to preserve their funds. This caused a huge trading volume spike for cryptocurrencies in India. Now, Indian regulators fear that more capital will float out through Bitcoin or other cryptocurrencies. According to an article by Business Standard, the Indian government is currently working on a legal framework that will properly regulate digital currencies like Bitcoin.
Governments and Cryptocurrencies
The report is also suggesting that the central bank of India may introduce its very own cryptocurrency. A partner at Nishith Desai Associates, Vaibhav Parikh, said following regarding the current situation:
I won’t be surprised if the government comes up with its own cryptocurrency because banks are trying blockchain as a technology and to make blockchain work it would need some cryptocurrency. Since it doesn’t trust Bitcoin it may come up with their own currency.
RBI Executive Director, Sudarshan Sen, commented further on the potential of a government-issued cryptocurrency:
Right now, we have a group of people who are looking at fiat cryptocurrencies. Something that is an alternative to the Indian rupee, so to speak. We are looking at that closely,
The Indian government isn’t the only one that is planning to issue a national cryptocurrency. According to Investopedia, the Chinese national bank is also planning to introduce its own cryptocurrency. After the recent crackdown on cryptocurrency exchanges in China, many experts believed that this would be the end of cryptocurrencies in China. But this crackdown may come necessarily as Chinese authorities are planning to introduce further regulations for initial coin offerings and cryptocurrency exchanges.