India is reportedly weighing a potential ban on private cryptocurrencies such as Bitcoin and Ether, while pushing for the widespread use of the digital rupee, the country’s Central Bank Digital Currency (CBDC).
According to a report by local news outlet, the Hindustan Times, government officials have been consulting with key institutions and regulators about private cryptocurrencies, including stablecoins. Their assessment concluded that the risks associated with these digital assets outweigh their potential benefits.
“CBDCs can perform all the functions of cryptocurrencies,” stated one official, emphasizing that CBDCs offer greater advantages without the risks linked to private digital currencies. They pointed out that while blockchain technology underpins cryptocurrencies, its broader applications—such as the tokenization of government securities, credit distribution to marginalized groups, and targeted subsidies—could serve more socially beneficial purposes.
The report indicated that the specific institutions involved in these consultations remain undisclosed. However, the discussions are believed to precede an anticipated government discussion paper on cryptocurrency regulation.
Earlier this year, the Indian government announced plans to release a public consultation paper outlining comprehensive cryptocurrency regulations by September or October 2024. The paper is expected to gather insights from industry experts and stakeholders, forming part of India’s ongoing efforts to establish clear regulatory guidelines for the crypto sector. Though scheduled for release in September, the paper has yet to be published.
India’s stance on cryptocurrencies has been in flux. In 2018, the Reserve Bank of India (RBI) banned banks from processing cryptocurrency transactions, but the ban was overturned by the Supreme Court in 2020, leading to a resurgence in the crypto industry. Since then, regulatory discussions have vacillated, with the possibility of a ban still looming as the country explores its own CBDC.
RBI Governor Shaktikanta Das recently reiterated concerns about cryptocurrencies, warning they could threaten India’s economic stability, while praising the advantages of CBDCs.
Meanwhile, India’s Ministry of Finance clarified that there are no immediate plans to legislate on regulating cryptocurrency transactions. In a statement to Parliament, Minister Pankaj Chaudhary said that the Financial Intelligence Unit (FIU) has the necessary authority to monitor the crypto sector, particularly concerning money laundering and terrorism financing. Other law enforcement agencies, he noted, are already equipped to handle illegal activities under current legal frameworks.
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