‘Despite fluctuating values, Cryptocurrencies have a potential future. These digital assets might find a way to become effective means of payment,’ noted Raghuram Rajan, the former Reserve Bank of India (RBI) Governor and chief economist for the IMF, at the Reuters Global Markets Forum.
However, Rajan believes that for the positive trend around cryptocurrencies to continue the digital assets will have to find a proper use case. “Cross-border payments is one area which is wide open, because of the huge transaction cost,” he added.
The crypto industry in India is on a massive surge. Ranked second in the Global Crypto Adoption Index 2021, the number of crypto investors in India has grown from 5 million in 2018 to over 15 million in 2021. With over 90 lakh users and 60% of the market share, CoinSwitch Kuber is India’s largest crypto exchange.
Currently a Professor of Finance at the University of Chicago Booth School of Business, Rajan hinted at the possibility of cryptocurrencies being classified as digital assets. “Right now, in this heady environment with asset prices really picking up, many cryptos are also being valued — not so much as a means of payments — but as assets in their own right,” he noted.
The crypto exchanges in India have for long requested the government to define cryptocurrency as a digital asset rather than a currency. Experts believe this will help the government address the concerns of financial risks associated with it.
Besides, the renowned economist threw much of his weight on well-regulated stablecoins and expressed urgency in bringing forth appropriate regulations. Though remaining skeptical on what drives their valuation, Rajan said that the ‘Cryptocurrencies have a potential future, particularly well-regulated stablecoins.’
Stablecoins are cryptocurrencies whose price is linked to an underlying asset such as gold or national currencies like the US dollar. These assets are similar to any other cryptocurrency but bring forth price stability.
What is the Government’s Stance so far?
In a recent interview with Economic Times, Finance Minister Nirmala Sitharaman said that the legislation on cryptocurrencies is nearly complete and is currently awaiting the cabinet’s approval. The FM reiterated that the government is not against cryptocurrency and is looking at ways to help India’s fin-tech sector.
“We cannot be moving ahead as if this doesn’t exist. We are not saying no to cryptocurrency. We are saying we will have to see how this technology can help fin-tech to maximise the potential it has.” she added.
Amid China’s crackdown on cryptocurrency, the FM noted that India is ideally located to attract businesses moving out of China.
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