India Favour CBDCs Over Bitcoin and Ethereum
India is increasingly seeming on the point of a landmark decision in relation to Central Bank Digital Currencies (CBDCs) as global interest mounts. It also stands as the clearest signal yet from Indian regulators that they prefer central bank digital currencies (CBDCs) and could see a digital rupee, but with politics it’s sensible to juxtapose the denotation against reality.
Changes to Central Bank Digital Currencies
India has for years had an ambivalent relationship with cryptocurrencies, with regulators and authorities reportedly taking a dim view of their adoption. During the most recent meetings that took place on October 22, top officials reiterated and stressed how CBDCs provide all the benefits of private cryptocurrencies but none of their drawbacks. The digital rupee and CBDCs in general are seen by most as a way to have many of the advantages cryptocurrencies offer while still being stabilised, secured, and checked by the government.
A person familiar with these discussions, who did not wish to be identified, said: “CBDCs can do anything that cryptos can. The reality is that CBDCs provide more benefits than cryptos without the risks of private cryptocurrencies. This has proved instrumental, especially since the country is set to release a discussion paper that will largely determine its course of action in terms of cryptocurrency regulations.
Fears of the Rise in Private Cryptocurrencies
The discussions brought up various issues related to the instability of cryptocurrencies, such as Bitcoin and Ethereum, alongside stablecoins like Tether or last night’s topic, wrapped coins. Final thoughts Although stablecoins are intended to remain largely free of fluctuation in price, recent events, including the collapse of top 10 market cap asset TerraUST at this time, have proven that these types of assets may also become a systemic risk. The collapse, in which TerraUST’s fixed-peg caved to the dollar, sent shock waves throughout cryptocurrency markets and served as yet another sign of potential pitfalls posed by private parallel currencies.
They are one of the reasons why regulators in India want CBDCs. They argue that a centrally issued digital currency, supported by the Reserve Bank of India (RBI), can provide similar benefits to your typical consumer: fast transactions at low cost and better cross-border payments without opening up the economy for potentially hazardous crypto-market movements.
Path ahead for Regulating in India
This decision soon to take place could be a momentous occasion for digital assets in India. Indian government to bring paper on private cryptoassets under stronger rules This could mean an all-out ban on private cryptocurrencies or harsh regulations curbing their use to a significant extent.
This in part reflects India’s earlier adoption of the International Monetary Fund and Financial Stability Board synthesis paper. It creates an enabling environment for countries to use domestic law surrounding cryptocurrencies, which can be more stringent than the global minimum standards set by bodies like GAFI. Although implementing this framework does not necessarily mean that India will impose a blanket ban on cryptocurrencies, it gives the Indian government more leverage in case they want to come down heavily.
CBDCs as a Better Alternative
Shaktikanta Das, the Governor of the Reserve Bank of India (RBI), has been a prominent supporter of central bank digital currencies, highlighting how CBDCs can disrupt financial transactions with particular emphasis on cross-border payments. On the other hand, he has voiced fears concerning personal cryptocurrencies as they could undermine financial stability in the country. Das recently reaffirmed in a statement that CBDCs were better suited for cross-border transactions and might help hedge against the threats posed by decentralised digital currencies such as Bitcoin and Ethereum.
Having already reached the pilot phase of its digital rupee issuance, India is positioning itself as a veritable frontrunner in CBDC adoption. It will set a principle if the country decides to ban private cryptocurrencies or imposes stricter regulations on them and other nations dealing with digital assets follow suit.
This is in contrast to the broader trend of governments worldwide that offer their countries CBDCs (in concept) and control most or all financial institutions, instead favouring central bank digital currencies as a way to maintain power over their money while still enjoying the benefits that come with virtual currency. If India makes a crucial call regarding the future of virtual currencies in its economy, it could have consequences beyond shaping the financial landscape within Indian territory and instead reverberate across international debates related to cryptocurrency regulation. In the meantime, one can only ask whether India pitting up the digital rupee at its digital economy heart will overshadow private cryptos perhaps.
