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As authorities concentrate on advancing the digital rupee, India is getting closer to outlawing private cryptocurrencies like Bitcoin and Ether. Concerns about the dangers of private cryptocurrencies have led the government to discuss with a number of organizations and authorities.
On October 22, the Hindustan Times reported that government consultations have led to the conclusion that the risks tied to cryptocurrencies outweigh their potential benefits. This includes concerns over stablecoins. One official noted, “Central Bank Digital Currencies can do whatever cryptos do,” adding that CBDCs provide more benefits without the associated risks of private cryptocurrencies.
Though the specific organizations involved in these discussions were not named, the talks are believed to be in preparation for a discussion paper on cryptocurrency regulation. This paper is expected to clarify India’s official stance on the matter.
India’s government has long debated how to handle cryptocurrencies. Earlier in the year, Ajay Seth, India’s Secretary of Economic Affairs, revealed that an inter-ministerial group was working on a detailed policy. The group includes key players like the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI). This discussion paper, initially expected in September, has been delayed, but its release is anticipated soon.
While India adopts a cautious approach, the International Monetary Fund (IMF) and Financial Stability Board (FSB) have advised against an outright ban on digital currencies, proposing a regulatory framework instead. However, as one official pointed out, countries are free to implement stricter rules if needed, saying, “it doesn’t stop any country from adopting higher restrictions, including a complete ban.”
Despite concerns, officials see value in blockchain technology for financial inclusion and government services. Blockchain could improve the efficiency of government subsidies and tokenize government securities, even as India moves away from private cryptocurrencies.