E-Paper
CBDC has an edge on Bitcoin, Ether: Experts to govt
India's regulators favor banning private cryptos like Bitcoin, citing CBDCs' advantages. They stress CBDCs' potential for financial inclusion and safety.
Prefer HTon Google
Key institutions and regulators that the government consulted on the issue of cryptocurrencies are in favour of prohibiting private cryptos such as Bitcoin and Ether since any advantage they might offer in areas of benefits transfer can be leveraged by the use of the Central Bank Digital Currency (CBDC).
According to two people aware of the matter, the consultations have been held ahead of the government’s plans to prepare a discussion paper on the topic. The consensus from these discussions is that the risks far outweigh the benefits from crypto, including so-called stablecoins.
“CBDCs can do whatever cryptos do. In fact, CBDCs have more benefits than cryptos, minus the risks associated with private cryptocurrencies,” one official said, speaking on condition of anonymity.
The official questioned the stability of stablecoins, which are cryptocurrencies linked to assets like gold.
However, the government will make a final decision after extensive consultation.
India, as part of the G20, adopted the synthesis paper by the International Monetary Fund (IMF) and the Financial Stability Board (FSB) on this matter in September 2023. “Whilst the IMF-FSB synthesis paper proposes to have a minimum threshold for regulation, it doesn’t stop any country from adopting higher restrictions including a complete ban,” the second official stated.
The officials emphasised that blockchain technology --- which underpins cryptocurrencies but can be used for a variety of other purposes --- could be used for various socially beneficial purposes, such as tokenisation of government securities, end-use credit to weaker sections and targeted subsidies.
Reserve Bank of India (RBI) Governor Shaktikanta Das recently spoke about utilising the full potential of CBDC at a conference in Bengaluru. “The programmability feature of CBDC could serve as a key enabler for financial inclusion by ensuring delivery of funds to the targeted user,” Das said.
India’s CBDC, known as the digital rupee (e ₹), was launched as a pilot in the wholesale segment in November 2022, followed by a retail pilot in December. The retail pilot now has over 5 million users and 16 participating banks.
In August, State Bank of India (SBI) launched a pilot project in Odisha and Andhra Pradesh, lending to tenant farmers for specific agricultural inputs through programming the end-use.
Officials believe CBDCs have immense possibilities both domestically and in cross-border transactions. The government plans to expand the scope of CBDC gradually after analysing data from ongoing pilot projects.
