Indian regulators are considering banning private cryptocurrencies such as Bitcoin, focusing on the potential of central bank digital currencies (CBDCs) to provide a more secure and inclusive financial system, according to local media reports. It is said that they are doing so.
The government is consulting with key institutions on this issue, with many supporting a ban on private cryptocurrencies. According to the report, they highlight that potential benefits such as ease of transfer of benefits can be achieved with the country’s digital rupee.
An official told reporters on condition of anonymity:
“CBDCs can do everything that private cryptocurrencies claim to do, but with far less risk.”
They also said that stablecoins (cryptocurrencies pegged to assets such as gold) are not as secure as commonly believed. The news comes despite India’s position as a global leader in cryptocurrency adoption.
CBDC priority
The discussions come ahead of a planned government discussion paper, with regulators stressing that the risks posed by cryptocurrencies, including stablecoins, outweigh any benefits.
India, which supported the 2023 Comprehensive Document on Cryptocurrency Regulation by the International Monetary Fund (IMF) and Financial Stability Board (FSB) as part of the G20, may take a tougher approach. The comprehensive document supports minimum regulations but allows countries to impose stricter measures, such as a complete ban on private digital currencies.
Officials advocating a ban argue that blockchain, the technology behind virtual currencies, can still be used for other socially beneficial purposes. They mentioned potential applications of blockchain in tokenizing government securities, providing credit to underserved communities, and more effectively targeting subsidies.
In recent remarks, Reserve Bank of India (RBI) Governor Shaktikanta Das praised the programmability of CBDCs and said this could play a pivotal role in financial inclusion.
In a recent speech, he said:
“CBDCs can ensure that funds reach their intended recipients without leakage.”
India’s digital rupee, CBDC, was launched in the wholesale sector in November 2022, followed by retail trials in December of the same year.
Since then, the retail initiative has grown to include more than 5 million users and 16 participating banks. The State Bank of India (SBI) is also considering the use of CBDC for tenant farmers in Odisha and Andhra Pradesh to provide targeted loans for agricultural purposes.
Officials believe that the digital rupee has great potential not only for domestic financial transactions but also for international payments. The government plans to gradually expand the CBDC pilot program after reviewing performance data.
Although a final decision on banning private cryptocurrencies has not yet been taken, India’s growing support for the digital rupee suggests a strong preference for central bank-controlled digital currencies over decentralized alternatives.
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