The Reserve Bank of India (RBI) has, understandably, taken a cautionary line on cryptocurrency. This follows a high-level meeting chaired by the Prime Minister, where it was disclosed that the government had a “forward-looking and progressive” view on the new way of financial transactions. In retrospect, when the Internet came of age and Indian companies like Infosys, TCS and Wipro began producing software for multinational companies worth billions of dollars, the government had no clue about how they worked. Social media, including internet-based television channels and newspapers, began to overtake the traditional print and electronic media in terms of reach.
It took a while for the government to understand the new technology and take regulatory measures which are still in their nascent stage. Cryptocurrency is now a decade old. Bitcoin was the first to be used. Today, the total transactions for which bitcoin is used are worth trillions of dollars. There are now innumerable such coins. The beauty of the currency is that it is invisible and all the details of the transactions are encrypted over several individual computer systems that it is virtually impossible to duplicate it and, thereby, cheat. Its strength is that it is outside of governmental framework.
In other words, cryptocurrency is safer, stronger and more dependable than the traditional currency, which can be counterfeited, against which a leader like Narendra Modi had to think of introducing ‘extraordinary’ solutions like demonetisation. Reports suggest that the government will bring forward a Bill to control cryptocurrency in the next session of Parliament. The whole world will be watching how Indian lawmakers handle the subject. That the RBI has a view of its own, different from the government’s, is not surprising. It is vested with the responsibility of managing the country’s financial system.
The use of cryptocurrency is limited and it does not, therefore, pose a threat to the traditional brick-and-mortar banking system. RBI Governor Shaktikanta Das may not be wide of the mark when he says that the volume of cryptocurrency use in India is over-exaggerated. But when the claim is that Rs 6 lakh crore is invested in cryptocurrency, it cannot be brushed aside. While it is not necessary that the government should control everything, cryptocurrency should not come in handy to tax evaders, criminals and terrorists. What is needed is control with caution!