The government is considering launching crypto tokens for monetary transactions within the country, even as the present ban on cryptocurrencies is probably going to continue, sources said.

A committee studying the utilization of crypto assets is functioning on a group of rules, and specific actions, including a roadmap for permitting cryptocurrencies in future.

Once the draft rules are prepared and lawfully vetted, it'll be tabled before Parliament, sources said.

Unlike virtual or cryptocurrency, that is treated as a similar of cash, crypto token may be a representation of cash. It cannot be utilized in place of fiat money. Crypto tokens are supported block chain application.

"The committee is examining if crypto tokens will be used to replace smart cards such as metro cards in the public sector to begin with. Similarly, in the personal sector, it can be utilized in loyalty programmes like air miles wherever its use is restricted to purchasing the next ticket and cannot be converted into money," said a senior official in the ministry.

The committee set up by the finance ministry under the chairmanship of Department of Economic Affairs (DEA) secretary is studying the chance of using numerous crypto assets, as well as crypto currency.

"The committee is studying the possibility of using cryptocurrencies or the crypto technology (distributed ledger technology) for monetary transactions and also what kind of regulations are required for that," said DEA secretary Subhash Chandra Garg who is heading the committee. The new technology has a lot of promise, he said.

While "the currency is completely banned, the committee is discussing its different usage and how it can be integrated in India," he said. Garg categorically denied allowing use of cryptocurrency in any manner as well as in payment systems.

Reserve Bank of India (RBI) had in April directed all the banks to prevent dealing with people and businesses dealing in virtual currencies from july 5.

"The banking regulator has come out with regulations. It has debarred the banks from handling anybody or any aspect of cryptocurrencies. We don't believe the cryptocurrencies to be currencies at all. We have issued several advisories for individuals to not deal with it. As a result of it's risky, it is a Ponzi kind of scheme. Therefore, cryptocurrencies are banned in this country," said Garg.

However, crypto tokens, if introduced, will be a sort of digital token for currency and not a substitute for fiat currency. "One will need to pay physical money to buy a token which can be keep as a code in any basic mobile feature phone. It can even be used for remittances. So, it's simple to implement from technology also as regulatory point of view. However in case of cryptocurrency, one must allow it as a legal tender first," a senior official in the ministry said.

Experts feel that the Indian government is unlikely to shift its stance on cryptocurrency in the near term, however may allow crypto tokens to check waters. The committee will also provide prospects and consequences of allowing crypto currency.

"Crypto token operates in a closed system and does not impact the country's financial policy in contrast to cryptocurrency, that interferes with the cash supply scenario," said Digital Lenders' Association of India (DLAI) president Alok Mittal. "Many governments in the world are considering using crypto token," he said.

"This could be a tough subject, involving technology which is changing every now and then. That's why it's taking some time," Garg said.

The Inter-Ministerial Committee (IMC), comprising of members from rbi, Sebi and IT ministry, was scheduled  to give its report in july.

"As soon as we are ready to complete our work we will be to come out with it. It's not advisable to give a timeline," he said.

NOT CRYPTOCURRENCY


  • Crypto token operates in a closed system and does not impact the country's financial policy unlike cryptocurrency, that interferes with the money provide situation  



  • One will need to pay physical money to buy a token that may be keep as a code in any basic mobile feature phone