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Indian bitcoin players wary of Facebook’s stablecoin

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Cryptocurrency companies represented by the Internet and Mobile Association of India are fighting a case in the Supreme Court against the regulator’s ban
CHENNAI: Indian companies in the cryptocurrency space say Facebook’s reported plan to test its virtual currency code-named Libra in the country will potentially bypass regulations that doesn’t allow using banking channels for digital currency transactions.

Facebook is expected to allow peer-to-peer transaction of its cryptocurrency and, unlike domestic bitcoin companies, the social media giant’s proposed currency system would not require to use banks to transfer money to buy or sell digital currency, founders of some cryptocurrency startups in the country told ET. The only benefit with Facebook’s move could be that digital currencies may gain legitimacy, they said.

In April 2018, the Reserve Bank of India had banned regulated entities from providing services in virtual currencies to any individual or business. The banking regulator, however, encourages use of blockchain, the underlying public ledgerbased technology to improve transparency and traceability.

On May 8, Bloomberg reported that Facebook is building “stablecoin”, a cryptocurrency pegged to the US dollar that it plans to test in India this year for its WhatsApp payments. “If this (Facebook’s stablecoin) becomes a reality it will change the entire crypto industry... Facebook may not have to worry if the currency operates within their platforms,” said Nischal Shetty, founder of cryptocurrency exchange platform WazirX. “There isn’t a law which prevents users within a platform from exchanging value, for example, in the form tokens, between each other.”

Peer-to-peer exchange of digital tokens are allowed as it doesn’t involve transactions through the banking system. Sathvik Vishwanath, founder of Bengaluru-based Unocoin, suggested that such a development by a large player like Facebook lends legitimacy to the technology. He has been trying to raise awareness around the technology and drumming up support on social media for a formal framework for it. “This is good news for the cryptocurrency ecosystem in India,” Vishwanath told ET.

“Anything like this which displays the usage of the technology by a legitimate player like Facebook or WhatsApp will bring a positive approach for the users.” RupeeCoin, a startup that looks at offering rupee-equivalent blockchain-based digital currency targeted at South Asia, however, feels India needs to be cautious of Facebook’s plan. “An interesting project to be deployed in India but, at least for us, something to be cautious about,” Rupeecoin, promoted by Adam Syed, tweeted on May 8.

“The lack of proper rules and the history that Facebook has in regards to information management are both slight things to keep in mind,” it said. A mail sent to Facebook seeking comments remained unanswered as of press time Sunday. Cryptocurrency companies represented by the Internet and Mobile Association of India are fighting a case in the Supreme Court against the regulator’s ban. The next hearing on this case is scheduled in the second week of July.

Nitin Sharma, founder of Incrypt Blockchain, suggested that for the Facebook project to be deployed on a large scale in India, regulatory approval may eventually be a major requirement.

Cryptocurrency traders supporting the Indian pro-cryptocurrency regulation campaign, however, feel that a Facebook-backed project may not necessarily be the best thing for digital currencies.

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