The government is considering launching crypto tokens in India for financial transactions and is evaluating if they can replace smart cards, according a report by DNA.
A government committee is working on a set of regulations and specific actions, including a roadmap for permitting cryptocurrencies in India some time in the future.
The draft regulations will be tabled before Parliament after they are legally vetted, sources told the news daily.
“The committee is examining if crypto tokens can be used to replace smart cards such as metro cards in the public sector to start with. Similarly, in the private sector, it can be used in loyalty programmes such as air miles where its use is limited to buying the next ticket and can’t be converted into money,” a senior government official was quoted as saying.
That said, the existing ban on cryptocurrencies in India will probably continue, sources told the paper.
Unlike cryptocurrencies, crypto tokens do not impact the country’s monetary policy as one will have to pay physical money to buy a token.
The token could be stored as a code in any basic mobile feature phone. While it is treated as an equivalent of money, the blockchain based crypto token is but a representation of money.
The committee, set up by the Finance Ministry and headed by the Department of Economic Affairs (DEA) secretary, is studying the possibility of using various crypto assets, including cryptocurrency.
“The committee is studying the possibility of using cryptocurrencies or the crypto technology (distributed ledger technology) for financial transactions and also what kind of regulations are needed for that,” DEA secretary Subhash Chandra Garg told the news daily.
Garg denied allowing the use of cryptocurrency in any manner, including in payment systems, but said that the committee is discussing its other usages and how it can be mainstreamed in India.
In April, the Reserve Bank of India (RBI) had issued a diktat prohibiting entities regulated by it to extend services to cryptocurrency-related firms.
“The banking regulator has come out with regulations. It has debarred the banks from dealing with anybody or any aspect of cryptocurrencies. We don’t believe the cryptocurrencies to be currencies at all. We have issued several advisories for people to not deal with it. Because it is risky, it’s a Ponzi kind of scheme. Therefore, cryptocurrencies are banned in this country,” Garg said.
Experts believe that the Indian government is allowing crypto tokens to test the waters and is unlikely to shift its stance on cryptocurrency in the near future.
The inter-ministerial committee (IMC), comprising members from RBI, SEBI and the IT ministry, was scheduled to submit its report in July. Garg said that since it is a difficult subject, involving technology that is changing every now and then, it is taking some time.
“As soon as we are able to complete our work we will be to come out with it. It is not advisable to give a timeline,” the DEA secretary said.