Crypto a force multiplier for the deployment of digital currency in India
As India creates a CBDC, building on and leveraging an existing crypto tech stack would be a safe option, especially one that has withstood CCP nation-state attacks.
Taipei: The list of bills has been released for the winter session of Parliament in the world’s most populous democracy. This includes much needed crypto regulation in India. Surprisingly, the description of the crypto bill was textual to that introduced earlier this year, despite the monumental developments in crypto during the same period. These include the ban on China, which ultimately benefited the United States, and El Salvador’s successful decision to make Bitcoin official legal tender.
It is important that there be updates to the bill taking into account new developments of such magnitude. Additionally, careful design is guaranteed with a crypto policy that has broad implications that go beyond the traditional reach of the Reserve Bank of India (RBI.)
The current bill links two joint policies. First, it seeks to facilitate the introduction of a central bank digital currency (CBDC) to be issued by the RBI, and second, to ban private crypto in India. This second part of the bill aims to ensure a smooth deployment of the CBDC, but could harm the project in practice.
Public comments from officials suggested the ban would target the crypto’s payment function. However, this focus on the payment function is misguided and counterproductive to the primary goal of a successful CBDC deployment in rupees, in light of geopolitical risks that are not well covered in the current consultation on rupee. cryptography policy.
It is important that regulatory and enforcement resources shift from banning crypto payment functions to improving the CBDC’s “unit of account” function in rupees. Cryptography is quite similar to the Internet, in that markedly different functions can be built on the base layer in response to specific local demands of the population. Payment is not the primary use of crypto in India due to the superior existing systems, and therefore the current policy direction is to address a non-existent problem perceived by the RBI.
The resources and direction of the government led by world-renowned reformer Prime Minister Narendra Modi should be aimed at mandating and protecting the “unit of account” function of the digital rupee, the seminal foundation of all fiat currency, in India . As fiat currencies around the world turn to digital forms and our next generations spend more and more time of the day in the digital metaverse, in which the Chinese Communist Party (CCP) has a dominant lead, borders physical will become blurry and irrelevant. . With the right policies, India can supplant China as the leader of this new financial order.
As such, in the near future, a ruler’s grip on his own economy may be eroded by technological encroachment from a politically motivated adversary. Imagine that children get used to thinking in technologically superior CBDC terms of CCP in the metaverse, and inevitably begin to do the same in real life. It is the existential threat that RBI must establish a counter-strategy against, rather than focusing on the payment function of crypto. Unlike China’s digital threat, this poses minimal risk to society.
Prime Minister Modi correctly pointed out the digital issue as requiring united action on the part of democracies seeking to keep authoritarian rule at bay. Caution and patience are required for democracies to issue central bank digital currencies in a practical manner. A poorly prepared issuance of a CBDC would pose a risk to national security due to the risk of obsolescence posed by the much more advanced version of CCP called electronic payment in digital currency (DCEP). In addition, the authoritarian conception of the DCEP, such as state supervision, could be an overwhelming temptation for some central banks to retaliate. This would end up corroding the founding principles of democracies.
As India creates a CBDC, building on and leveraging an existing crypto tech stack would be a safe option, especially one that has withstood CCP nation-state attacks. However, without the abundant talents, capital and infrastructure of India’s private crypto sector, India is unlikely to be able to design and implement a CCP-proof CBDC. The best way to attract the scarce resources needed in cryptography is to design a well-designed cryptographic law. Given its experience with deploying demonetization five years ago, RBI needs to ensure that any major political deployment needs to be flawless in design and implementation, rather than jeopardizing its own credibility as well. than that of democracy which has become the pivot. of the security structure protecting a free, open and inclusive Indo-Pacific.
As Parliament enters winter session to finalize the crypto bill, special attention needs to be paid to the interests of India as a whole, with national security being an integral part. The RBI case should not attempt the impossible but use crypto as a supporting force in building a geopolitically robust CBDC. Smart policy will ensure that crypto is not a threat but an asset. This is what the United States and the major economies in the EU are doing. After all, cryptocurrency is only a currency in name but not in practice. By design, currency will always be the domain and privilege of the central bank, so crypto behaves according to a properly proposed categorization of commodities and securities in India. We are in the 21st century and India is a country of very young people. The RBI must understand the future before embarking on legislation that may ignore the reality of change.
James Lee is a financial ant based in the United States and Taiwan.