We just hit a landmark moment with respect to bitcoin in India. Listen to Reserve Bank of India’s Governor, Mr. Rajan, speak intelligently about bitcoin:
interviewer: “anybody here plan to go into ecommerce?”
smart student: “My question is not exactly related to ecommerce, but to a more important topic of bitcoins.”
governor: “nothing is more important than ecommerce.”
interviewer: “oh no, bitcoin is fascinating, let’s tackle that.”
smart student: “reading your book ‘fault lines’, it comes out as you are somebody who is not pro government intervention. Being from the Chicago School of Thought, you propagate more free markets. So I want to know, bitcoin has specifically very good advantages for a developing nation. So, I want to know, what is your view as a regulator on free banking, and having more of equitable currencies floating in the market?”
governor: “See, I think we’re still watching the evolution of these kinds of currencies, one of the problems that we envisaged with bitcoin, one of course was security issues and you’ve seen that they’re not as secure as people thought they were and there have been stolen bitcoins and so on. But the second issue was the fluctuation in value. For money, you require something called a stable store of value and something that fluctuates so much is less effective in use as money. There are some lessons to be learned from the technologies that bitcoin has employed, some of them are useful, some of them are worrisome. And uh, we have to see how we take on board such technologies. I have no doubt that down the line, we will be moving towards primarily a cashless society and we’ll have some kind of currencies like this which will be at work. For us at the Reserve Bank, this may happen in 10 to 20 years from now, but we’ll have to figure out how we make money because the way we generate most of our revenue is through forms of seniorage. People are willing to hold currency free of interest and that’s how we make money, but we’ll figure that out. But I think these virtual currencies will certainly get much better, much safer and over time will be the form of transaction, and that’s for sure.”
interviewer: “and India will adopt them at some point? we’re not going to reject them out of hand?”
governor: “you know, in a sense, credit cards are already performing some of that role. The amount of rupees that flow through your hands I presume are far less than used to before credit cards. So this is going to go all around, you’ll have near field devices which you just tap and go. I mean, all that we want to permit.
interviewer: “you want to permit?”
governor: “yes, we want to permit. I mean we’re not saying we’re going to lose money therefore we won’t do it, we’ll find some other way of getting money, maybe the government will fund us eventually.”
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To read the bitcoin white paper, visit: https://bitcoin.org/bitcoin.pdf
