Despite continuing to maintain an unfavorable stance for cryptocurrencies and citing their potential role in money laundering, Indian government officials revealed they are looking at tokenized datasets and other cryptographic forms of blockchain technology.
Open to Crypto, Closed to Currencies
As reported by local outlet DNA India on August 10, 2018, Indian officials are seemingly considering the use of crypto-”tokens” in several avenues. However, they add that this excludes any use of cryptography and blockchain technology for the purposes of a crypto-”currency,” or a sophisticated means to transfer money and conduct cross-border transactions.
As put by the officials, crypto-tokens do not themselves hold any inherent value, instead, represent an underlying dataset which can be accessed only by the private key holders.
The crypto-tokens would not serve as a substitute for fiat currency, but represent an underlying value to process faster and more transparent payments.
The report stated:
“One will need to pay physical money to buy a token which could be stored as a code in any basic mobile feature phone. It can even be used for remittances. So, it is easy to implement from technology as well as a regulatory point of view. But in the case of cryptocurrency, one needs to allow it as a legal tender first.”
Committee Spearheading Development
The Indian government also has a committee in place to oversee all developments, regulations, and operations pertaining to digital assets in the country.
The yet-unnamed committee Chaired by the Department of Economic Affairs (DEA) secretary Subhash Chandra Garg, who earlier in July 2018 created optimism amongst Indian crypto-investors after his favorable remarks towards the concept of cryptocurrencies.
At the time, Garg added the DEA was working closely with legal and economic regulators to create an optimal environment for the growth, regulation, and acceptance of cryptocurrencies in India.
In today’s context, the committee will additionally define what it considers as “crypto-tokens” and include a detailed analysis for the same.
As per prior reports, the department is chalking out a detailed “roadmap” to present before lawmakers and the National Parliament, focusing primarily on allowing certain crypto-assets to be used in the country.
However, his comments have taken a turn since, as observed in the recent development. Garg stated:
“The committee is studying the possibility of using cryptocurrencies or crypto technology (distributed ledger technology) for financial transactions and also what kind of regulations are needed for that [while] the currency is totally banned, the committee is discussing its other uses and how it can be mainstreamed in India.”
The DEA Chairman “categorically denied” any use of cryptocurrencies as a payment method in India, including payment systems and cross-border remittances.
Meanwhile, Garg praised distributed ledger technology, which encompasses blockchains, DAGs, and other decentralized hybrid systems, adding they hold “a lot of promise.”
In the report, Garg once again pointed out the government’s “several advisories” to investors and crypto-enthusiasts in the nation, warning the public against investing in the “Ponzi Scheme” invention and famously regarding cryptocurrencies as “not currencies at all.”
The central bank has held similar views of the digital asset class. While the Reserve Bank of India (RBI) was scheduled to hold a hearing on July 20, 2018, on its stay against cryptocurrencies and related-businesses, the financial authority allegedly played its part in shifting the hearing to September 2018.
For the uninitiated, India banned all banks from dealing with cryptocurrencies on July 5, 2018, effectively killing off the asset class while not banning them directly.
Cover Photo by Sayan Nath on Unsplash
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