“Having a CBDC is a very good idea,” said Dr Amar Patnaik, who is also a member of the Parliament’s Standing Committee on Finance
Speaking at the opening session of Inc42’s Fintech Summit on Day 2, he stated that regulators need to start learning and building various protocols to understand blockchain on which these digital currencies are based
The cryptocurrency space is extremely risky, and users need to know more about the underlying technology before using it, he added
The opening session of Day 2 of Inc42’s Fintech Summit saw an interesting dialogue between Utkarsh Sinha, MD of Bexley Advisors, and Dr Amar Patnaik, Rajya Sabha MP (BJD) and a member of the Parliament’s Standing Committee on Finance.
The session titled Innovation Vs Regulation: Decoding Fintech & Crypto’s Policy Puzzle had discussions on critical topics, including how regulators should approach cryptocurrency and the recent RBI mandate on PPIs and credit card issuance that could affect fintech players.
The duo talked about the proposed introduction of CBDC (central bank digital currency) in lieu of crypto. Although industry players refuted CBDC’s entry to control crypto usage for digital payments as ‘naive’, Patnaik believed “having a CBDC is a very good idea”.
“It provides some sense to the crypto market, some kind of direction. It also provides an alternative to customers and investors who can invest in cryptocurrencies or CBDCs,” he said during the Fintech Summit 2022.
But regulators cannot adopt run-of-the-mill procedures to regulate cryptocurrencies, he said, adding that they must be more agile and prompt while monitoring those digital currencies.
While talking about crypto regulation, the MP also stressed on the lack of digital literacy in India. If crypto comes out as another peer-to-peer (P2P) payment medium, there will be higher risks associated with such norms. Therefore, regulating crypto as an asset class seems to be most suitable. Besides the RBI, capital market regulator SEBI can also act as a regulator in the crypto space.
“This [cryptocurrency] space is extremely risky – let’s accept it. I really do not know why crypto players keep saying it is not so. We have to say that this is not for everyone,” he told Sinha.
Why Regulators Are Needed
According to the RBI’s Payments Vision 2025 report, India’s digital payment ecosystem has evolved significantly with the launch of UPI and e-wallets. ‘Digital’ is becoming a more acceptable form of currency, but if unregulated, it can result in similar losses incurred by users of chit funds and other Ponzi schemes, said Patnaik.
As the central bank gears up to launch the CBDC in a phased manner to boost India’s digital economy, there are concerns across the crypto segment. For example, RBI’s deputy governor, T Rabi Sankar, stated that the CBDC could ‘kill’ the reason for the existence of private cryptocurrencies. Simply put, the central bank’s action will impact cryptocurrencies negatively.
However, Patnaik thought there would be a need for blockchain-based CBDC.
“I support blockchain-based CBDC simply because private virtual digital assets are not going to go away. They will proliferate. If they attain scale, even if they are private and unregulated, they are going to impact the money supply in the economy and the fiscal stability of the country. So, regulators need to start learning and building various protocols to understand the tech,” he said.
