Indian regulators are reportedly considering banning cryptocurrencies again as they consider them high-risk investments and are leaning toward more regulated alternatives, namely central bank digital currencies known as CBDCs. are. But why would “the world’s largest democracy” consider banning virtual currencies? Our view is as follows.
In India, CBDC is the digital rupee (e₹). Insiders have suggested that authorities believe CBDCs could serve a similar purpose as cryptocurrencies, but with potentially increased oversight and reduced risk. The Reserve Bank of India has already started implementing the digital rupee, which has become very popular since its introduction in 2022.
As of 2024, approximately 5 million users will adopt CBDC for retail transactions, while the wholesale sector will see a significant decline. In 2018, the Reserve Bank banned financial institutions from providing services to crypto companies. This decision was later overturned by the Supreme Court. Discussions of introducing a new ban by 2021 have resurfaced, but the government has instead decided to implement one of the world's toughest crypto tax structures in 2022. As of 2024, profits from cryptocurrencies will be taxed at 30%, plus an additional tax of 1. % applied to all transactions, discouraging people from using cryptocurrencies as currency.
Although the government has consistently stated that Bitcoin will not be recognized as legal tender in India, Indian traders continue to show a strong preference for popular assets such as Bitcoin and Ethereum over CBDCs. This approach to cryptocurrencies has raised eyebrows, with some speculating that the high tax rate on cryptocurrencies was a strategic move to deter crypto trading and encourage people to take up CBDC as an alternative. is hidden.
However, this speculation has galvanized India's crypto community, which has taken a firm stance against the introduction of cryptocurrencies despite regulatory norms.
Also read: India emerges as global crypto powerhouse despite regulatory hurdles
Sumit Gupta, CEO of CoinDCX, recently said, “An anonymous expert on @htTweets compared CBDCs to cryptocurrencies and claimed that “CBDCs can do anything that cryptocurrencies can do.'' I just read an article saying: CBDC is better than Bitcoin. “I humbly disagree with the above statement. CBT season crypto assets should not be seen as competitors as they solve different purposes. Rather, they complement each other. By leveraging it, we can enhance the efficiency, security, and comprehensiveness of CBTCS and make it more adaptable to real-world applications.”
I just read an article about @htTweet Here, an anonymous expert compares CBDC to cryptocurrencies and claims that “CBDC can do anything that cryptocurrencies can do. CBDC is better than Bitcoin.”
I humbly disagree with the above opinion. CBDC and cryptoassets serve different purposes and should not be… pic.twitter.com/QJS5DowmQx
— Sumit Gupta (CoinDCX) (@smtgpt) October 23, 2024
In India, the legal status of virtual currencies is very ambiguous. The government seems to prefer strict regulations and does not recognize it as legal tender. There are serious concerns that the anonymity of cryptocurrencies may enable illegal activities.
Additionally, the decentralized nature of cryptocurrencies poses oversight challenges as they do not meet the legal definition under the Foreign Exchange Management Act (FEMA). This lack of clarity has contributed to ongoing regulatory discussions with officials considering supporting CBDCs to help establish a more regulated monetary system. But while larger countries are concerned about cryptocurrencies, sparsely populated countries like Bhutan are using the opportunity to build up their Bitcoin holdings and use its hydropower to mint digital gold. It is setting an example for India and other countries.
