India is leaning towards a complete ban on private cryptocurrencies such as Bitcoin and Ethereum in a bid to regulate the risks of the current volatile market.
The government said it will prioritize central bank digital currencies (CBDCs) as they offer all the benefits of private cryptocurrencies without the instability and potential for abuse.
The regulator added that CBDCs do not necessarily have to meet financial inclusion goals related to cryptocurrencies. The Reserve Bank of India (RBI) supports CBDCs as they enable a more secure alternative that can achieve the financial inclusion goals typically associated with cryptocurrencies.
Expansion of CBDC adoption in India
In 2022, India launched a digital rupee, e₹. Introduced by over 5 million users and 16 participating banks, this initiative is gaining significant momentum and has the potential to perhaps define the future of digital finance in India. The digital rupee is currently being used in targeted programs.
BTC market cap currently at $1.32 trillion. Chart: TradingView.com
According to RBI Governor Shaktikanta Das, this means more efficient and secure delivery of financial services that target resources and vulnerable sections of society. With the pilot project gaining momentum and success, the Indian government is further expanding the scope of CBDC not only for domestic use but also to enhance cross-border transactions, which could revolutionize international trade and remittances. They will look to expand.
This expansion will further strengthen India's position in the global financial landscape. This improvement could also lead to greater economic inclusion and digital financial transformation across most sectors.
India's great wonder, the Taj Mahal. Image credit: Kriangkrai Thitimakorn via Getty Images.
Cryptocurrency: regulatory changes and taxation
India's relationship with cryptocurrencies has been in a state of flux. Cryptocurrency trading was revived in 2020 after the Supreme Court repealed the ban on virtual currency trading in 2018. Still, since then, India has adopted a fairly strict tax regime that classifies cryptocurrencies as virtual digital assets (VDAs) and taxes their income. The rate is 30% and a rate of 1% TDS is applicable for transactions above INR 10,000.
Image: Ecoinomy
While governments recognize the promise and interesting properties of blockchain and cryptography in general applications, such as the tokenization of government securities for enhanced security, they still have some concerns regarding private currencies. I'm holding you.
This is especially true after the submission of a comprehensive document approved by the Financial Stability Board and the International Monetary Fund in 2023, in which India maintains stricter regulation, up to an absolute ban on private cryptocurrencies in general. It is within the scope of discretion.
Meanwhile, CBDCs remain the favorites and could serve as a template for regulatory options, as the latter decision will depend on a properly conducted consultation process.
Featured image courtesy of Synergia Foundation, chart courtesy of TradingView
