India Debates Crypto Ban, Weighs Digital Currency

Instead of outright private crypto banning like Bitcoin, India is considering implementing Central Bank Digital Currency (CBDC).

According to news released on Tuesday, October 22, 2024, India is considering the establishment of a Central Bank Digital Currency (CBDC) and a possible ban on cryptocurrencies like Bitcoin and Ether.

This change in position comes as authorities assess the advantages of CBDCs, which they feel can offer comparable benefits with fewer dangers, in response to government worries about the threats posed by private cryptocurrencies.

India Crypto Ban Discussions and CBDC Growth

According to a story published by the Hindustan Times on Tuesday, Indian officials are becoming more inclined to outlaw cryptocurrency following discussions with essential organizations.

Officials have stated that the risks of cryptocurrencies, including stablecoins, exceed any potential advantages, even though the precise organizations engaged in these discussions have yet to be identified.

“CBDCs can do anything that cryptos can,” remarked a senior official. “But without the risks,” they continued, highlighting the growing preference for the digital rupee over decentralized digital assets.

The Reserve Bank of India (RBI) has been aggressively encouraging the simultaneous use of its retail CBDC.

Even with these efforts, the RBI’s goal of one million transactions by the end of the year is still well below the current volume of transactions, which is about 18,000 per day.

The RBI is developing new capabilities, such as offline transactions, and connecting the digital rupee with the widely used Unified Payments Interface (UPI) to increase acceptance.

In July, India’s Secretary of Economic Affairs, Ajay Seth, announced that an interministerial group comprising essential organizations such as the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) is drafting a policy paper on cryptocurrencies.

There is now more doubt about India’s official position on the issue because this study, which was first anticipated to be published in September, has been postponed.

The document is anticipated to allow nations to enact more stringent regulations, such as prohibiting private cryptocurrency.

India’s Cryptocurrency Regulatory Past and the Prohibition Discussion

Many policy reversals have characterized India’s relationship with cryptocurrencies.

The RBI banned banks from aiding cryptocurrency transactions in 2018, but the Supreme Court reversed that ruling in 2020.

Despite the crypto industry’s judicial success, government representatives, including Finance Minister Nirmala Sitharaman, still hesitate to accept private cryptocurrencies as legal cash.

RBI Governor Shaktikanta Das voiced worries in November 2023 on the possible disruptive impact of cryptocurrencies on the Indian economy, highlighting support for the CBDC plan as a safer substitute.

Millions of Bitcoin users are in India, so the country’s next policy choice will likely have an international effect.

Even though global institutions like the Financial Stability Board (FSB) and the International Monetary Fund (IMF) have pushed for a balanced regulatory approach, India is willing to enact more stringent laws or outright prohibit them.