India Weighs Ban on Cryptocurrencies as It Favors Digital Rupee Adoption
Regulators in India are considering a complete ban on private cryptocurrencies, including the likes of Bitcoin and Ether. The country is instead focused on the use of CBDCs, such as the digital rupee. This comes at a time when India is trying all means to have a controlled and regulated financial ecosystem where digital currencies from the government are in the lead as opposed to private cryptos.
Government Consultations Signal a Shift
On October 22, local media reported that the Indian government had consulted key financial regulators and institutions on the future of private cryptocurrencies, including stablecoins. A consensus among officials was reached that the risks associated with private digital assets outweigh the benefits that come with them. According to one government official, CBDCs have the potential to accord all the advantages associated with cryptocurrencies but without inherent risks from private digital currencies.
These discussions reportedly took place as part of preparations for a forthcoming policy paper on cryptocurrency regulation-which is expected to shed light on India’s official stance. Though details of the participants in the consultations remain undisclosed, it is not hard to understand that the country’s central bank, the Reserve Bank of India, and other large financial regulatory bodies were part of the discussions.
Paper on Cryptocurrency Regulation Delayed
Indeed, early this year, India’s Secretary of Economic Affairs, Ajay Seth, had told reporters that an inter-ministerial group, comprising the RBI and the SEBI, was already working upon a discussion paper for the regulation of cryptocurrency. Although the paper was supposed to come out in September, its release has been delayed, and it is not known if the upcoming paper is going to be the same or an updated one.
The synthesis paper published by the IMF-FSB in July 2023 called for a balanced regulatory approach to digital currencies, while simultaneously leaving room for countries such as India to impose harsher measures or bans if deemed appropriate. Indeed, it is expected that India will take a tougher approach, officials noting the possible economic risks involved with private cryptocurrencies.
The Future of Blockchain in India
The regulatory crackdown on cryptocurrencies hasn’t dimmed optimism on the use of underlying blockchain technology by officials in India. Scores of government sectors see the potential of blockchain as a driver for financial inclusion, efficiency in securities transactions, and, critically, the better delivery of government subsidies.
India’s Continuing Crypto Journey
The relation of India with cryptocurrency has been one full of ups and downs. After the RBI banned facilitated crypto transactions by banks in 2018, the Supreme Court overturned it in 2020. Since then, India has flirted with both the idea of embracing and banning cryptocurrencies, with the looming introduction of the digital rupee as a potential alternative.
