Indian regulators are considering banning private cryptocurrencies like Bitcoin and Ethereum, advocating for Central Bank Digital Currencies (CBDCs) instead.
As reported by local news publication The Hindustan Times, Indian government institutions are leaning towards a ban on private cryptocurrencies, citing CBDCs as a more favorable option that provides the same benefits for less risk.
Anonymous officials have told the press that recent consultations on the topic have led to the conclusion that the risks outweigh the benefits when it comes to private cryptocurrencies.
“CBDCs can do whatever cryptos do,” said one official. “In fact, CBDCs have more benefits than cryptos, minus the risks associated with private cryptocurrencies.”
The digital rupee (e₹), India’s own CBDC, has already gained over five million users, with 16 participating banks joining in since the currency’s launch in late 2022. What’s more, the State Bank of India (SBI) has been experimenting with the application of CBDC, such as the launch of a pilot project in Odisha and Andhra Pradesh where lending to tenant farmers came via programmed end-use credits.
As it stands, cryptocurrencies are not deemed legal tender in India, despite the country already establishing a tax framework for cryptocurrencies.
What are CBDCs?
CBDCs, which stands for Central Bank Digital Currencies, are a new form of digital currency that are issued by a country’s central bank. They function in a similar way to cryptocurrencies but the central bank sets their value, in a similar way to a national currency.
India isn’t the only country to develop a CBDC, with the Bank of England considering issuing a digital pound, similar to a digital banknote. 2020 saw the Central Bank of the Bahamas launching the Sand Dollar, a digital currency that sought to boost financial inclusion. In the US, state governments have blocked similar attempts in the States.
The benefits of CBDCs include making it easier for people without bank accounts to access financial services, making transactions more secure, and making it easier for governments to implement financial policies.
Featured image: Midjourney
