Since the announcement of the banning of India’s two biggest banknotes last November by Indian Prime Minister Narendra Modi, the country has pushed efforts toward digital banking. Yet despite the drive to make this happen, hurdles still face the country to make it a reality.
At the news of India’s demonetization, the digital currency bitcoin reached new highs in the country with demand pushing the price of one bitcoin to $881 in November. With a surge of bitcoin adopters in India it appeared that a push toward digital banking was the way forward as more than a billion people faced government-imposed limits on ATM and bank withdrawals.
Taking advantage of the situation and to promote digital banking was Indian Finance Minister Arun Jaitley. In November, he stated that banks should start to promote digital banking in ‘mission mode’ to limit the use of physical currency. The fact that Indian bitcoin buying had reached $985 at the end of November was another driving force of moving away from fiat by adopting the digital currency to a country that has over one billion mobile phone users and a largely young population.
In light of this, the Indian Union HRD Ministry launched a digital currency campaign to increase youth awareness of digital currencies such as bitcoin in December. By doing so it was hoped that they would see bitcoin as a cash alternative thereby helping to establish the push toward digital banking.
Sarbananda Sonowal, the Indian chief minister of Assam recently followed suit by launching a digital banking campaign to instil in the local population that digital banking is the way forward.
With a country strapped for cash, electronic payments are gaining ground as people continue to struggle.
Obstacles to Digital Banking
And yet, despite these concerted efforts in various parts of the nation to get digital banking off the ground, the country still has many obstacles in its path.
In a recent report from the Times of India, India’s second largest bank, the Bank of Baroda, has attempted to make the Indian village of Naya Gav cashless for the past two months. However, even though training materials were provided in addition to running a campaign, the bank found that illiteracy and an unyielding attitude from residents was slowing down adoption.
This, however, is not the only problem that India is experiencing.
Back in December it was reported that India Today, a well-known Indian news outlet, had published an investigative report on bitcoin. It’s thought that its objective was to tarnish the reputation of the currency. However, while the report states that bitcoin is ‘notoriously used by money launderers and criminals,’ it fails to add that fiat currency is used by criminals too.
However, such a report from a prominent news outlet will only further hinder India’s goal toward digital banking.
To add to the country’s woes, Indian bitcoin exchange Coinsecure came under a DDoS attack at the end of last year, which saw operational delays on its website, mobile application and other API-enabled platforms.
Nevertheless, while bitcoin exchanges and websites appear to be obvious targets for DDoS extortionists, Kraken CEO Jesse Powell told CCN back in February that ‘most bitcoin companies aren’t profitable and we’re therefore not great targets.’
That, however, doesn’t seem to stop extortionists from still trying to get bitcoin ransoms in the first place. Consequently, the people of India are less likely to trust the digital currency and are more likely to shy away from the prospect of digital banking.
Of course, with a country that reduced around 90 percent of its cash in circulation at the time of the demonetization, it’s not going to be an easy road for the country as it attempts to push digital banking.
But things are changing.
India's central bank, the Reserve Bank of India, announced that the blockchain technology had “matured enough” to be the core technology to support the digitization of India’s fiat currency, the rupee.
It may be a small step toward better things, but it's a step nonetheless.
Featured image from Shutterstock.