Cryptos 'may figure' on RBI central board meet agenda on December 17

The Reserve Bank of India’s (RBI’s) central board may take up matters concerning the issuance and regulation of cryptocurrencies at its meeting in Lucknow on December 17. The development comes close on the heels of the Ministry of Finance informing the Lok Sabha (LS) on Monday that a Bill on cryptocurrencies is being readied.

“A Bill on cryptocurrency and regulation of the official digital currency is under finalisation for consideration of the Cabinet,” Minister of State (MoS) for Finance Pankaj Chaudhary had said in written reply.

While it couldn’t be ascertained if the subject of cryptocurrencies has been listed as an item on agenda for the RBI board meeting, a top source said “it may figure”.

It is not unusual for the RBI board to deliberate on matters not listed on the agenda. A board member can seek the permission of the Chair — RBI Governor Shaktikanta Das — and raise it. A prime example of this in recent times was the one-time loan restructuring for India Inc, which was taken up at the RBI board meeting on June 26, 2020 — its first after the breakout of the Covid-19 pandemic.

The RBI brass has made public its stance on cryptocurrencies. “It is important that the matter be taken up at the board level, given the huge interest it has generated,” said another source.

As for the central bank digital currency (CBDC) and its issuance by the RBI, a reference was made to the speech of Deputy Governor T Rabi Sankar on July 22: “The introduction of a CBDC has the potential to provide significant benefits, such as reduced dependency on cash, higher seigniorage due to lower transaction costs, and reduced settlement risk. The introduction of a CBDC would possibly lead to a more robust, efficient, trusted, regulated, and legal tender-based payment option. There are associated risks, no doubt, but they need to be carefully evaluated against potential benefits. As we move forward in the direction of India’s CBDC, it would be the RBI’s endeavour to take necessary steps to reiterate the leadership position of India in payment systems.”

Incidentally, “the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021”, according to the LS bulletin, seeks to “to create a facilitative framework for the creation of the official digital currency to be issued by the RBI. The Bill also seeks to prohibit all private cryptocurrencies in India. However, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses”.

As recently as November 16, Das had said: “When the central bank, which has been entrusted with maintaining macroeconomic and financial stability of the country, says after detailed internal deliberations that we have serious concerns (about cryptocurrencies) and that there are far deeper issues involved, there should be serious discussions around it.”

He added, “I am yet to see any such serious, well-informed discussions”, and lamented that the talks on the issues mostly centred around the fact that it is a new technology and the central bank must embrace it or regulate it.

Das was speaking at the State Bank of India’s annual Banking & Economics Conclave.

A week earlier, the Crypto Assets Council and various chambers of commerce had made a strong case for cryptocurrencies at the meeting of the Standing Committee on Finance, headed by former MoS for finance Jayant Sinha.

At the Business Standard BFSI Insight summit, Das had said: “Cryptocurrencies are a serious concern to the RBI from a macroeconomic and financial stability standpoint. The government is actively looking at the issue and will decide on it. But as a central banker, we have serious concerns about it, and we have flagged it many times.”

In his speech, Sankar had given the intellectual reasons for the central bank’s reservations about cryptocurrencies. He noted that a line of argument that has helped private virtual currencies gain some degree of legitimacy is that most money in modern societies is, in fact, already private since they represent deposit liabilities of private banks.

“There are two factors that are conveniently pushed under the carpet. One, deposits are issued by banks under licence of the sovereign issuer of currency (usually the central bank). Two, deposits are accepted by the public only because they are convertible one-to-one into sovereign currency,” added Sankar.