Indian regulators are considering banning cryptocurrencies such as Bitcoin and Ether, promoting the use of the digital rupee instead.
On October 22, local media outlet Hindustan Times reported that the government had consulted with key institutions and regulators regarding private cryptocurrencies, including stablecoins, and concluded that the risks outweigh the benefits offered. The report cited two officials familiar with the matter.
One official said that central bank digital currencies “can do anything that cryptocurrencies can do,” adding, “Apart from the risks associated with private cryptocurrencies, CBDCs have many benefits over cryptocurrencies.”
The specific parties involved in the consultation were not disclosed, but the consultation reportedly preceded an upcoming consultation paper that the government is expected to issue on the subject.
Earlier this year, India's Economic Affairs Minister Ajay Seth announced that an inter-ministerial group including the country's central bank, the Reserve Bank of India, and market regulator, the Securities and Exchange Board of India, would clarify the country's official position on cryptocurrencies. Discussion paper for.
The paper was originally scheduled to be published in September but has been postponed, and it is unclear whether this is the same policy document.
At the time, Seth referred to the July 2023 IMF-FSB Comprehensive Document opposing a complete ban on digital currencies. Instead, the paper proposed a balanced regulatory approach, which India's finance minister, central bank governor and other G20 countries also adopted later that year.
However, the document also emphasized that countries have the flexibility to impose stricter regulations.
“While the IMF and FSB synthesis document proposes minimum regulatory thresholds, it does not prevent any country from introducing higher regulations, including a blanket ban,” a second official said. added.
A final decision on this issue will be taken after further consultations, the report said.
Despite his anti-crypto stance, the official remains optimistic about the underlying blockchain technology, saying it could strengthen financial inclusion, tokenize government securities, and make targeted subsidies more efficient. He pointed out various socially beneficial use cases, such as providing
History of virtual currency in India
India's relationship with cryptocurrencies is turbulent. In 2018, the RBI banned banks from handling crypto transactions, but the Supreme Court overturned the ban in 2020, giving the crypto industry a second chance.
Since then, there has been an up-and-down debate over regulation, and talk of a potential ban remains looming as India explores its own CBDC.
Last week, RBI Governor Shaktikanta Das reiterated his concerns about cryptocurrencies while highlighting the benefits of CBDCs. The RBI remains firm in its position that digital assets like Bitcoin can pose a risk to the country's economic stability.
India's Finance Minister Nirmala Sitharaman has also taken a firm stance on cryptocurrencies, arguing that private cryptocurrencies cannot be considered legal tender, but supporting regulation.
Meanwhile, securities regulator SEBI has advocated for a multi-agency approach to virtual currency legislation and submitted a proposal in this regard to the Ministry of Finance earlier this year.
India does not yet have a formal crypto regulatory framework, but it does impose a 30% tax and 1% TDS on crypto profits. Regulators are also increasing their oversight of the crypto trading market, with the Financial Intelligence Service requiring crypto service providers to obtain a license.
