India, Asia’s third-largest economy, remains skeptical about Facebook’s proposed cryptocurrency Libra and has said that it won’t just allow the coin into the country, according to a report by Bloomberg.
“Design of the Facebook currency has not been fully explained,” Economic Affairs Secretary Subhash Garg said in an interview. “But whatever it is, it would be a private cryptocurrency, and that’s not something we have been comfortable with.”
The central bank of India and the government have both practically outlawed cryptocurrencies by disallowing banks to use them. The Reserve Bank of India has restricted use, and the government is in the process of writing a law that has strict penalties on usage.
When Libra launches in 2020 or in the future, it will be a currency that’s tied to real money, called a stablecoin. This will differentiate it from other digital offerings like bitcoin and theoretically help control the price from ballooning or cratering one way or the other. However, Facebook hasn’t asked for India’s permission specifically.
India’s response to Libra follows the words of analysts with the Jefferies Financial Group who say that Libra’s going to need the sort of significant growth that only a region like India can provide. Facebook users in India have doubled since 2015 to 310 million and are predicted to hit 440 million by the year 2023.
Facebook wants to tap into that huge base of users for Libra — but before it can do so, it needs to cross some regulatory obstacles. A top court in India signed off on the Reserve Bank’s 2018 crypto ban after operators on the country’s exchange protested. The issue is about to come up for a hearing on July 23.
The central bank is in charge of managing digital money in the country and wants to continue doing so, while also trying to manage money laundering concerns. Abu Dhabi and South Korea have both created rules regarding cryptocurrencies for these same reasons. The Indian regulator is operating under the assumption that bitcoins aren’t real currency because the law says they have to be made of metal or exist in a physical way and have a stamp on them from the government.
The government’s law against crypto is called “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019,” and violators could face between one and 10 years in jail for dealing with the currency, whether in mining or trading.