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The strengthening Bitcoin community in the Indian market has elicited a response from the country’s central bank — the Reserve Bank of India. The Reserve Bank which was started exploring the cryptocurrency technology has responded like any other bank when it comes to Bitcoin usage.
The deputy governor of the Reserve Bank of India, R Gandhi was quoted in a leading Indian media outlet saying,
“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.”
Gandhi was speaking at a technology summit organized by the Indian Banks Association. In the same speech, he is said to have mentioned the two characteristics of currency which is necessary for widespread adoption. According to Gandhi, currency should instill confidence among the users, and it shouldn’t be anonymous forever. He believes that the usage of Bitcoin and other cryptocurrencies are limited to a closed circle, filled with early adopters, adventurists, and risk-takers.
However, Gandhi’s statement misses a couple of the main points. The confidence in money, especially the Indian Rupee hasn’t stayed the same since last year’s demonetization move. At the same time, cash transactions are more anonymous than Bitcoin transactions as the blockchain maintains a record of all the transactions happening over the network. Also, Bitcoin transactions can be tracked back to the user, which is probably much easier than tracking the cash movement throughout the economy.
The Deputy Governor of the Reserve Bank of India also mentioned that most of the countries are currently in the process of printing more currency, with Nordic economies as an exception. In Gandhi’s view, the virtual currencies can’t be “mass used” as it is not backed by any underlying assets and the financial, legal, security and consumer protection risk is more. The possibility of hacking incidents was also mentioned during the session.
The points put forth by Gandhi, regarding Bitcoin adoption has few holes in it. Even though he is right about the challenges currently being faced by the digital currency when it comes to widespread adoption, it doesn’t make fiat a perfect currency. Also, the government and the central bank should work together to create favorable regulations to promote the use of Bitcoin and blockchain technology instead of finding ways to downplay the invention and its disruptive nature.
Ref: DNA India | Image: Shutterstock