India Seeks to Join the Crypto-Bandwagon: Are CBDCs the Way Forward
Columbia Law School
Volume III, Issue IV, 2020
The Reserve Bank of India (RBI), vide a circular issued in April 2018, effectively ‘banned’ trading in virtual currencies in India – sounding the death knell for majority of ‘crypto’ traders and investors. RBI’s ‘bury head in the sand’ response was met with several lawsuits filed across India; ultimately finding their way to the Apex judicial body.
On March 4, 2020, the Supreme Court of India, vide a 180-pages detailed decision, handed out a new lease of life to the stakeholders by lifting the ‘ban’. The Supreme Court recognized RBI’s authority to regulate the field but held against imposition of a total prohibition. The ruling comes as a welcome respite for the Indian fintech community.
Comparable to India’s conundrum, a large part of the last decade witnessed major economies struggling to find a suitable response to the flourishing cryptology-driven parallel global financial system. While some major economies imposed an outright ban on trading in virtual currencies; other jurisdictions conceded to embrace the new technologies, rather than allow a parallel system to flourish without governmental oversight. Some countries also explored other forms of virtual currencies (Central Bank Digital Currencies or CBDCs) to replace their deteriorating physical cash economy.
Through this Paper, I expound the existing literature on the subject, and thereafter, attempt to analyze the benefits of the underlying technology in cryptocurrencies and advocate for its usage in issuance of a hybrid form of CBDCs to stimulate the current financial system of the country. I propose an e-Rupee model to assimilate the advantages of Facebook’s Libra currency model with the need for necessary control and supervision attached to the nature of CBDCs, for adoption by India.
Keywords: Bitcoin, Cryptocurrencies, Virtual Currencies, Central Bank Digital Currencies, Libra