India To Consider Allowing Crypto Tokens For Financial Transactions

News, Regulation | August 13, 2018 By:

The government of India is considering regulations to allow crypto tokens for facilitating financial transactions in the country, despite its hardline stance on cryptocurrencies.

Local news outlet DNA India reported on Friday that a committee set up by the Finance Ministry of India, under the chairmanship of the Department of Economic Affairs (DEA) secretary, is working on a set of regulations and roadmap to allow certain crypto assets to be used in the country.

“The committee is studying the possibility of using cryptocurrencies or the crypto technology (blockchain technology) for financial transactions and also what kind of regulations are needed for that,” said DEA secretary Subhash Chandra Garg who is heading the committee. “The new technology has a lot of promise. While the currency is totally banned, the committee is discussing its other usage and how it can be mainstreamed in India.”

In April this year, the Reserve Bank of India, the country’s central bank, directed all banks to wind up any existing banking relationships with crypto exchanges and traders, which came into effect on July 5. Since then, several exchanges have challenged the RBI in the supreme court. A final date for hearing the matter has been set for September 11.

Garg categorically denied the future use of cryptocurrencies themselves “in any manner,” including in payment systems. But a senior official in the ministry said that crypto tokens, if introduced, will be a kind of digital token for currency and not a substitute for fiat currency.

“One will need to pay physical money to buy a token which could be stored as a code in any basic mobile feature phone,” the official said. “It can even be used for remittances. So, it is easy to implement from technology as well as regulatory point of view. But in case of cryptocurrency, one needs to allow it as a legal tender first.”