Although central banks worldwide are looking to launch real-world trials, India is still stuck at the policy stage
India's Crypto Economy
India's Crypto Economy is a brand-new weekly newsletter (delivered every Thursday) from Inc42 to help you decode the rapidly growing crypto economy and its implications on business, work and life. We launched this newsletter on the 4th anniversary of our weekly series “Crypto This Week” which completed 190 editions in May, 2021.
Dear Reader,
You have been truly amazing!
It has been 15 weeks since we started our weekly newsletter — India’s Crypto Economy — and we are now nearing 10,000 subscribers. Our growth has been fast and furious, much like the iconic bitcoin, and we keep evolving, much like the DeFi and the NFT ecosystem.
But there is always room for improvement as the times keep changing. Therefore, as we connect with you every week via this route and talk about crypto, write to us at [email protected] and let us know what you would like us to explore.
Now let us come back to our weekly affair. And this time, it is all about central bank digital currencies, or CBDCs.
From the ease of issuance to reducing the settlement risk in the financial system, the CBDC offers a slew of advantages over paper or polymer currencies. In fact, it is now deemed as digital currency 2.0 or the future of currencies.
According to Chetan Ahya, chief economist at Morgan Stanley, “Efforts to introduce CBDCs are gaining momentum, with as many as 86% of the world’s central banks exploring digital currencies.”
In 2020, a survey by the Bank for International Settlements also found that nearly 60% of the central banks were working on proofs of concept and testing them.
Earlier this year, China disbursed its CBDC eCNY (also known as digital yuan or digital renminbi) worth millions of dollars in several cities such as Shenzhen, Chengdu, Suzhou and Hong Kong as part of its pilot project. The digital currency reportedly has more than 10 Mn users.
In contrast, India is not yet through the proof-of-concept phase. The Reserve Bank of India is still mulling over the underlying technology — basically a choice between a centralised ledger or the distributed ledger technology, said RBI governor Shaktikanta Das. However, he is hopeful that the central bank can start trials by December 2021.
Will it be a real-world trial like the ones conducted in China?
Our sources at the RBI do not think so. “This certainly won’t be a real-world run, but an after proof-of-concept testing that we hope to start. We are still awaiting clarity over the policy-related issues,” said an official with knowledge of recent developments.
According to the official, the RBI has already submitted its inputs to the finance ministry. Once the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, is passed by Parliament, it will pave the path for real-world trials.
Incidentally, China has used permissioned blockchain technology for digital currency. But right now, there is no clarity regarding the technology India is going to use.
“We are being extremely careful about it because it’s a completely new product, not just for the RBI, but globally,” said Das in August this year.
It was not an exaggeration.
Di Gang, deputy director at the Chinese central bank’s digital currency research institute, recently cited numerous challenges posed by the ongoing CBDC execution. “We are currently facing multiple challenges, including on-chain and off-chain collaboration issues, business continuity problems, engineering implementation and security hurdles and performance issues,” he said.
CBDC | Five Key Challenges
- Developing system architecture including the sidechain, multichain, hardware acceleration, and on-chain and off-chain collaboration
- Privacy protection
- Autonomous controllability, open-source licensing and quantum computing
- Regulatory auditing: With blockchain nodes anonymised, encrypted and decentralised, monitoring becomes a challenge
- Compatibility and scalability, among other issues
In spite of the initial hiccups, it is now a general perception that CBDC is the future of money. Can the RBI join the global CBDC race before the winners capture the market?
Tweet Of The Week
Have you ever invested in crypto, preferably bitcoin? What’s your investment strategy? Cloud services firm MicroStrategy’s CEO Michael Saylor believes in holding these digital assets. After acquiring an additional 5,050 bitcoins recently, MicroStrategy has emerged as the company with the most bitcoins in its kitty.
For Binge Reading
NFTs And The World Of Art: Despite the widely available duplicates, Tyeb Mehta’s painting titled Kali (1989) was sold for INR 26 Cr in 2018. Now that non-fungible tokens, or NFTs, are everywhere, digital assets are trying to leverage them for validation and provenance. But marketers are facing huge challenges in terms of art branding, writes Christian Jensen.
A Decentralised Inflation Dashboard: What causes inflation? Is it a monetary phenomenon, an outcome of unbridled money printing, a social phenomenon, or both, or something more? Former CTO of Coinbase Balaji Srinivasan, Chainlink cofounder Sergey Nazarov, Pomp Investments’ A Pompliano, NFL player and crypto investor Russell Okung and Solana Labs’ cofounder Raj Gokal have joined hands to help develop a truly decentralised inflation dashboard similar to Coinmarketcap. And the developer gets $100K. Read it here.
Registered For The Crypto Summit?
With more than $216 Mn funding raised in seven years, India’s crypto and blockchain ecosystem is maturing at a fast clip and finally getting mainstream attention. Undoubtedly, this is the right time to talk about the scope and future of this emerging sector.
It is one of the key reasons we have decided to host The Crypto Summit 2021 — India’s largest crypto and blockchain event. Supported by CoinSwitch Kuber, Tezos, Polytrade, Persistence and Onfido, The Crypto Summit will be held on September 18-19.
Spread across two days and two stages, the crypto summit will host many eminent speakers such as Subhash Chandra Garg, former secretary, ministry of finance; Shailesh Lakhani, MD, Sequoia India; Sandeep Nailwal, cofounder and CEO of Polygon; Raj Gokal of Solana; Arthur Breitman of Tezos; Ashish Singhal of CoinSwitch Kuber; Nitin Sharma of Antler; Jalak Jobanputra of Future Perfect Ventures; Yield Guild Games’ Beryl Li and Raghu Yarlagadda of FalconX.
Through fireside chats, keynotes, masterclasses and panel discussions during the two-day extravaganza, we aim to decode India’s crypto landscape, its applications and use cases, what investors think about the country’s crypto ecosystem, the success stories of India’s crypto startups and much more.
Launches This Week
Cricket Foundation: Pruthvi Rao, the cofounder of layer 1 blockchain startup Zebi, recently launched Cricket Foundation, a crypto ecosystem dedicated to the game. It boasts more than 120 partners, 100,000+ followers and a $200 Mn market cap. It also features an NFT-powered cricket marketplace called CricketCrazy.io, showcasing more than 50 unique cricket moments.
SIP For Indian Crypto Investors: Crypto exchange BuyUcoin introduced a systematic investment plan (SIP) for Indian crypto investors/traders with an option to invest across 10+ crypto assets. Starting with a nominal amount of INR 100, investments can be done daily, weekly, monthly or quarterly.
Auto-Invest Plan (AIP) With Tokenised Gold And Silver: Delhi-based fintech startup OroPocket came up with an auto-invest plan (AIP) similar to SIP for digital gold and silver to enable stable and secure investments for all. Returns on gold-based AIP will depend on price appreciation. Gold has an annualised return of 24% compared to 5.25% interest rate on fixed deposits and 6.96% on recurring deposits.
ArcadeNetwork On Polygon: Dubai- and India-based gaming startup ArcadeNetwork, a decentralised platform for cross-metaverse asset interoperability, partnered with layer 2 blockchain system Polygon (Matic) to boost throughput, scalability and security.
In another development, Ukraine passed a law to legalise bitcoin after El Salvador announced the iconic crypto as a legal tender. However, crypto exchanges in India continue to struggle as leading legacy banks are yet to extend their suite of solutions to those platforms. Now reports emerge that the State Bank of India, the country’s largest lender, has blocked its UPI payments for crypto transactions.
As several exchanges face payment issues, traders complain that they are not able to withdraw their money from those platforms.
The thing is, either you allow crypto transactions, or you don’t allow it. Keeping in mind the Supreme Court’s verdict against a blanket ban on such transactions, it is high time that the RBI should issue a clarification to protect investors’ interests.
Till Next Week,
Suprita Anupam
