However, the groundwork for a ban on cryptocurrencies may have been unintentionally laid several years ago when the government launched its Jan Dhan-Aadhaar-Mobile trinity in the early years of the first Modi government.
JAM was a mammoth project undertaken by the government to enrol a majority of the country’s citizenry into the financial system by utilising their social security number, or Aadhaar number, and using that network to directly transfer subsidies.
“The Aadhaar project was rolled out to ensure that everybody has an account with the government, and they have their IDs and payments. I think that is part of the reason why they are going to crack down on cryptocurrencies,” Brent Johnson, CEO of the San Francisco, US-based Santiago Capital, told ETMarkets.com in an interview.
The Unique Identification Authority of India has issued over 122 crore Aadhar cards in the country, covering over 90 per cent of the population as on March 2020. According to UIDAI, 96 crore out of the 110 crore bank accounts have been linked to Aadhaar numbers.
If you add to this the number of mobile network connections in India, it is safe to say that the network for issuing a sovereign digital currency that is accessible to one and all is already existent. “The government probably wants to use that to issue its own cryptocurrency and government just does not like competition,” Johnson said.
Recently, RBI’s move to allow retail investors to directly open an account with its e-Kuber setup to purchase government bonds in the primary and secondary markets has also raised curiosity among market participants that it could act as a pre-cursor to the issue of a digital rupee.
RBI Deputy Governor BP Kanungo told journalists that an internal panel of the central bank is working on a model for a digital currency. “We had a committee that is still on the drawing board. In fact, an internal committee is taking a close look to decide the model of the central bank digital currency and you will hear from RBI very soon on this matter,” Kanungo said.
There over 75 lakh cryptocurrency owners in India with their total holding valued at more than $1 billion. Crypto enthusiasts in the country have lobbied with the government to reconsider the proposed ban, arguing that private cryptocurrencies can co-exist with a sovereign digital currency if they are defined as digital assets, and not private currency.
While it remains to be seen if the government will water down the bill to allow individuals to own cryptocurrencies like Bitcoin, it appears that what’s in the offing may have been foreseen a long time ago.