India is considering adopting Central Bank Digital Currency (CBDC) as an alternative to the private cryptocurrencies ban. The government is worried about the risks of decentralized digital assets like Bitcoin (BTC) and Ether (ETH). They are concerned about potential misuse in illegal activities and the difficulties in regulating these assets due to their decentralized nature.
India Government Worry About Private Cryptocurrency
Private cryptocurrencies have become very popular around the world, including in India. Many people are drawn to them because they can offer high returns and serve as an alternative to traditional banks. However, their decentralized nature and the anonymity they provide have raised concerns for authorities. Government officials worry that cryptocurrencies could help with money laundering, tax evasion, and funding illegal activities.
Indian authorities are now focusing on CBDCs, the digital versions of a country’s currency issued by the central bank. Unlike decentralized cryptocurrencies, CBDCs allow for digital transactions. It also enables the government and central banks to control monetary policy and financial oversight. This control makes CBDCs less vulnerable to the risks associated with private digital currencies.
Crypto Regulation in India
India’s CBDC consideration is part of a global movement. Many countries are considering or have already started adopting digital currencies. The Reserve Bank of India (RBI) has studied the idea of a digital rupee, and policymakers see clear benefits to having a CBDC.
Recall that, the government presented a bill prohibiting the use of cryptocurrencies in parliament. It postponed the bill twice last year: once during the budget session in February and again during the winter session in November. Finally, it scrapped the proposal to ban or regulate cryptocurrencies for now.
India’s government also amended the RBI Act of 1934 to create a legal foundation for digital Rupee’s creation.
CBDC Seeing Growing Interest From Central Banks
A recent Bank of International Settlement (BIS) survey revealed a growing interest in CBDCs. The survey, which included participation from 86 banks, found that 94% are actively exploring the creation of digital versions of their national currencies. This figure represents a jump from 905 reported in a similar 2021 BIS survey.
Meanwhile, Joachim Nagel, a European Central Bank (ECB) member, highlighted the importance of CBDCs. Nagel said CBDCs are an important tool to augment banks’ traditional business model. China, Nigeria, and the Bahamas were among the first nations to introduce their CBDCs. In the UAE, authorities have partnered with technology giants R3 and G42 Cloud for wholesale and retail CBDC applications.
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