Cryptocurrency regulation in India: Infosys co-founder Nandan Nilekani endorses digital coins as asset class

Nandan Nilekani (Image: PTI)

Infosys co-founder Nandan Nilekani wants India to accept cryptocurrencies as an asset class, a strong sign of its growing acceptance in India even as it faces regulatory uncertainty.

“Just like you have some of your assets in gold or real estate, you can have some of your assets in crypto. I think there’s a role for crypto as a stored value but certainly not in a transactional sense,” he told the Financial Times in an interview.

Nilekani, currently chairman of software giant Infosys and architect of the Aadhaar identity system in India still does not endorse cryptocurrencies as a mode of payment or as a substitute to government currency because of its volatility and energy zapping nature, FT said.

If the government legalises cryptocurrencies , it would allow “the crypto guys to put their wealth into India’s economy,” he said.

Nilekani has held this stance for a while. During a conversation with angel investor Balaji Srinivasan and Karthik Reddy of Blume Ventures in March, Nilekani said “We should think of crypto as an asset class and allow people to have some crypto. Crypto as a transaction medium will not work as fast as UPI, which is targeting a billion transactions a day. But crypto has enormous capital.”

“Indian regulators are also considering a Central Bank Digital Currency or CBDC. I am not sure if we need a private stable coin or if a digital rupee will be good enough. We need to look at how it will help Indians, how MSMEs can access capital using Bitcoins. No amount of tech is going to sway anyone's view,” he added in that conversation.

Nilekani throwing his weight behind cryptocurrencies could help the industry which has been clamouring for regulation for the few months when cryptocurrency investment activity is hitting record levels.

Banks however have not endorsed cryptocurrencies and mailed some customers a few weeks ago, saying their accounts will be suspended. They were following the Reserve Bank of India’s 2018 order banning cryptocurrencies, although the Supreme Court had recently struck down that order.

The RBI then clarified that banks cannot use that order to stop supporting cryptocurrency transactions.

As the industry awaits regulation, crypto players also said last week that they will self regulate, with the Internet and Mobile Association setting up a formal board to review issues, apply best practices and come as close to formal regulation as possible.