Topic: Reserve Bank of #India Looks for Alt Reserve (Read 2891 times)

bitcoin has an advantage compared to bankcoin (assuming bitcoin is used as main currency in global commerce): the reserves grow/shrink proportionally with the global economy.

I don't see why they would bother with Bitcoin when they could very easily and cheaply create Bankcoin: https://bitcointalksearch.org/topic/will-bankcoin-be-appearing-any-time-soon-129047

I'll have a crack at answering this one but I'll ask readers to bear in mind my limited understanding of the bigger picture.

If what you're referring to is what the OP is about then what they'd be buying it for is to put into cold storage as a reserve fro the Indian Rupee.  As I see it this is not an increase in distribution nor use for commerce.

In order to buy a proportion that would make any kind of impact on the overall value of their reserves they'd need to buy well more than is currently available at Mt Gox.  All I can see the impact being therefore is a massive inflation of the bitcoin price over a sustained period with an accompanying reduction in bitcoin available for everyone else.  

Of course the divisibility means in one sense it doesn't matter but without being able to justify my feeling about it I would be a lot more comfortable if the cause of such an increase in price and reduction of Bitcoin available to purchase were to happen in conjunction with wider dispersal, more and more geographically distributed nodes and minig outfits and more time for the software and Bitcoin economy to become more robust.

I would also be more comfortable for me, should central banks eventually decide to use Bitcoin as a reserve, if it were much more highly valued and distributed first.  It just wouldn't feel right for me for a single fiat-issuing entity to be the primary beneficiary of all subsequent growth in Bitcoin value.

What exactly would be the problem with a government or a lot of people "snatching up bitcoins"?

If India wants to act as a private entity in the BTC market I am all for that. Although it seems like any government [barring third world countries] could pool their resources en route to controlling the BTC market. What I think is most valuable about BTC is the fact that they are not tied to ANY government, crazy revolutionary organization, etc. They are tied to the world's people.

I think Bitcoin's which require a lot of technology to use, is not a good fit for a country like India. 

Maybe they are already looking at it .

Good point, but I'm quite sure those polititians don't even know how to install a client 

A nation cannot capitalize its own reserve, at least I don't see how it can. It needs to already have a global demand.

I think the major capitalization will happen when polititians learn how easy it is to hide bribes and kickbacks with bitcoin. They will also make sure it stays legal.

That's a chicken and egg problem. Once the central banks of the world started using it as a reserve currency, it'd be well-capitalized quickly

There is not enough capitalization for bitcoin to be used as a reserve currency now.

Except a good part of the criteria are not currently being fulfilled by bitcoin:

• fully convertible: don't know, what does that mean, exactly?
• exchange rate determined by market: CHECK
• there is a issuing country: FAIL
• should acquire a significant share of world trade: FAIL
• should have liquid financial market: MAYBE
• should have open financial market: CHECK
• should have large financial market: FAIL
• policy credibility: CHECK (maybe even good enough to make lack of issuing country not an issue?)

...it is a ponzi, unlike anything seen before.

The Reserve Bank of India is looking for emerging market currencies as alternative reserve currencies to the Dollar.

#Bitcoin is the answer.

Sounds about right

So what the heck is going on here? Inflation may have something to do with it—there just weren’t as many things to buy in 1970 that might require one to slap down a $100 bill—but that still wouldn’t explain why their proportion today has nothing to do with what people see in their wallets.

The short answer is that a lot of money is spending a lot of time outside the United States.

The cognoscenti look at the share of $100 bills as something of a proxy for foreign demand for US currency. An overwhelming majority of the $100 bills come from the Federal Reserve Cash Office in New York City, which handles the bulk of foreign shipments of US currency. A typical shipment is a pallet containing 640,000 such bills, or $64 million, according to a recent Fed paper.

Somewhat surprisingly, it’s unclear exactly how much American money is floating around outside the US. Estimates run the gamut. In the 1990s, one high-profile estimate pegged the number at as much as 70%. But more recent estimates hover around 25%-30%.

And while there are plenty of reasons folks outside the US might want to hold dollars, the thinking is that most people are not using these $100 bills to buy milk and bananas. No, most economists seem to believe $100 bills are most often used as stores of value—almost something like mini-Treasury bills that don’t pay any interest. This is especially so in developing countries, where problems with unstable currencies and inflation often mean the purchasing power of local currency gradually—or not so gradually—erodes over time.

The governor pointed out that one alternative was to have a menu of reserve currencies. "But this cannot happen by fiat. To be a serious contender as an alternative, a currency has to fulfill some exacting criteria. It has to be fully convertible and its exchange rate should be determined by market fundamentals; It should acquire a significant share in world trade; The currency issuing country should have liquid, open and large financial markets and also the policy credibility to inspire the confidence of potential investors. In short, the 'exorbitant privilege' of a reserve currency comes with an 'exorbitant responsibility'," he said.