India, being a leader in global crypto adoption, is considering banning private cryptocurrencies like Bitcoin and Ethereum in favor of central bank digital currencies (CBDCs). The government is exploring the potential of CBDCs to create a safer and more inclusive financial system. Many key institutions in India support the prohibition of private cryptos, arguing that the benefits can be achieved through the country’s digital rupee.
According to reports, officials believe that CBDCs can offer the same benefits as private cryptocurrencies but with fewer risks. They also expressed concerns about the security of stablecoins, which are cryptocurrencies pegged to assets like gold. Despite India’s prominent position in crypto adoption, regulators are leaning towards CBDCs over decentralized alternatives.
The government is set to release a discussion paper on the issue, with regulators highlighting the risks associated with cryptocurrencies, including stablecoins. India has endorsed the IMF and FSB’s 2023 synthesis paper on crypto regulation, which allows for stricter measures, including a total ban on private digital currencies. Officials advocating for a ban see potential in using blockchain technology for other socially beneficial purposes, such as tokenizing government securities and providing credit to underserved communities.
RBI Governor Shaktikanta Das praised the programmability of CBDCs, emphasizing their role in promoting financial inclusion. The digital rupee, India’s CBDC, was launched in the wholesale segment in November 2022, followed by a retail pilot in December of the same year. The retail initiative has seen significant growth, with over 5 million users and 16 participating banks. SBI has also explored CBDC usage for targeted loans for agricultural purposes in Odisha and Andhra Pradesh.
While the final decision on banning private cryptocurrencies is pending, India’s support for the digital rupee indicates a strong preference for central bank-controlled digital currencies. The government plans to gradually expand its CBDC pilot programs after reviewing performance data, highlighting the potential of CBDCs for both domestic and international transactions. India’s stance on CBDCs versus private cryptocurrencies showcases its commitment to creating a secure and inclusive financial ecosystem.