India Moves to Ban Private Cryptos, Favors Central Bank Digital Currency

The Indian government is considering a ban on private cryptocurrencies such as Bitcoin and Ether. Key institutions and regulators argue that the benefits of these digital assets can be replicated by the Central Bank Digital Currency (CBDC), based on recent consultations.

This decision stems from a strong experts’ consensus that the risks associated with private cryptocurrencies far outweigh their benefits, including stablecoins linked to assets like gold. In discussions ahead of preparing a policy discussion paper on crypto, key players have emphasized that CBDCs can mimic the functionality of cryptocurrencies while offering more benefits and significantly less risk. “CBDCs can do everything cryptos can do, and they offer more advantages,” an anonymous official stated. The uncertainty surrounding stablecoins’ stability was also raised as a concern during these conversations.

Notably, India adopted the International Monetary Fund (IMF) and Financial Stability Board (FSB) synthesis paper on this matter in September 2023 as part of its G20 commitments. While the document proposes a minimum threshold for regulation, it doesn’t restrict countries from imposing higher restrictions or bans.

Officials also highlighted the potential of blockchain technology beyond cryptocurrencies. They suggested that this versatile technology could be utilized for various socially beneficial purposes, such as tokenizing government securities, facilitating end-use credit to underserved sections, and administering targeted subsidies. The Reserve Bank of India (RBI) Governor Shaktikanta Das previously expressed his support for utilizing the full potential of CBDC in financial inclusion initiatives, particularly through its programmability feature.

CBDC Pilot Programs Show Promise

The CBDC pilot programs launched by the RBI have shown promising results so far. The digital rupee was initially tested on a wholesale scale in November 2022 and then later expanded to a retail pilot in December, with over 5 million users and 16 participating banks. The State Bank of India (SBI) has also taken a step forward by launching a pilot project in Odisha and Andhra Pradesh, providing loans for specific agricultural inputs to tenant farmers through CBDC end-user programming.

Officials believe that CBDCs have immense potential both domestically and internationally, particularly in cross-border transactions. The government is expected to gradually expand the scope of CBDC after analyzing data from ongoing pilot projects. Ultimately, the decision regarding private cryptocurrencies will be made following extensive consultation with all relevant stakeholders.

India is at the forefront of global grassroots movements for cryptocurrency adoption, despite navigating evolving regulations and high taxation. According to recent data from Chainalysis, the Central and Southern Asia and Oceania (CSAO) region experienced over $750 billion in crypto inflows from July 2023 to June 2024. This impressive figure positions CSAO as the third-largest cryptocurrency market in the world, trailing only North America and Western Europe.

Gairika holds positions in BTC. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.

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