Blockchain technology, the innovation behind digital currencies like bitcoin won’t be eliminating fiat cash despite gaining prominence in recent times, opined the deputy governor of India’s central bank.
Speaking at the inaugural FinTech summit organized by prominent industry associations representing Indian commerce, industry and software, Reserve Bank of India (RBI) deputy governor R. Gandhi has dismissed suggestions that blockchain-based digital currencies would put an end to paper money.
Pouring scorn over such a scenario, the central bank official was quoted by Indian business daily the Economic Times in stating:
The emergence of Bitcoins has led to some quarters predicting the end of the currency system itself. In my mind, it may remain a pipe dream that blockchain will eliminate currency.
On the contrary, the official has claimed that the world is seeing an increase of fiat currency in circulation, with the Nordic region proving the one exception. Sweden’s Riksbank, the oldest central bank in the world, is even considering the issuance of its own digital currency, an ekrona, after cash circulation dropped by 40% since 2009.
In marked contrast to her Indian counterpart, Riksbank’s deputy governor Cecilia Skingsley said in November 2016:
The less those of us living in Sweden use banknotes and coins, the clearer it becomes that the Riksbank needs to investigate whether we should issue electronic money as a complement to the money we have today.
Speaking at the event today, the Indian central bank official claimed that innovations like blockchain technology “admittedly” bring positive change. The flipside, is the disruption they create. “However, as innovations result in a paradigm shift, they are typically disruptive,” the RBI deputy governor stated.
More pointedly, he claimed that virtual currencies bring a number of financial, legal, security and consumer protection related risks.
“They are prone to losses arising out of hacking, loss of passwords, compromise of access credentials, malware attacks etc,” stated Gandhi, in quotes reported by a regional publication.
Further, virtual currencies do not satisfy the core requirements of confidence and anonymity to make any currency successful, according to the central bank official.
There is no underlying or backing of any assets for these currencies and value seems to be the matter of appreciation and speculation. Legal status is definitely not there. Usage of virtual currencies for illicit and illegal reasons has been reported and it is becoming uncomfortably large.
Gandhi also acknowledged the case for a digital currency issued by Indian regulators. The notion has already been studied by the research arm of the Indian central bank, which deemed earlier this year that blockchain technology had “matured enough” to become the core infrastructure to support the digitation of India’s fiat currency, the rupee.
Image from Shutterstock.
Last modified: May 21, 2020 10:02 AM UTC