IAMAI welcomes proposed official digital currency

The Government’s move to introduce an official digital currency through the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 has been welcomed by the Internet and Mobile Association of India (IAMAI), the largest industry body representing the digital ecosystem in the country.

A digital currency is a non-tangible currency that can be accessed through smartphones, credit cards and online cryptocurrency exchanges. It would be issued by the Government and its transactions and circulation recorded. Such currencies can significantly reduce transactions cost by reducing the price of acquiring or sharing information securely. The safety standards and monitoring of such transactions can be ensured through inalterable public ledger systems developed and managed through the emerging blockchain technology.

The Reserve Bank of India has first hinted at a fiat cryptocurrency in 2017, soon after the Report on the Inter Regulatory Working Group on Fin-tech and Digital Banking chaired by Sudarshan Sen. The Bank then detailed on the idea of a Central Bank based digital currency in its paper on the Distributed Ledger Technology, Blockchain and Central Bank. The paper discussed the global benchmarks of a Central Bank based Digital Currency and its possible application in India.

The Association believes that an official digital currency regulated by the Government will give impetus to the broader application of the distributed ledger technology and will create avenues of fintech innovation that are yet to be explored within the country. In fact, the Ministry of Electronics and Information Technology has recently published the “National Strategy on Blockchain”, outlining the importance of the blockchain technology and elaborating on the various applications of the technology across various sectors of law, trade, supply chain, insurance, real sate and many others.

However, the Association also pointed out that in a section of the media and non-expert circles, it has been indicated that the introduction of fiat digital currencies is preconditioned on “banning” other crypto assets. IAMAI raised issues regarding this artificial co-relation on grounds that fiat currency serves a totally different purpose than the other crypto currencies in India and both of them can co-exist. “In fact, existence and use of crypto assets by Indian consumers opens up a wide scope for Indian entrepreneurs to issue such currencies. And it is likely that Indians who comprise 15% of the global buyers will prefer an Indian crypto asset,” IAMAI said.