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Indian regulators favor CBDC instead of Bitcoin and Ethereum

Indian regulators favor CBDC instead of Bitcoin and Ethereum

GrafaGrafa2024/10/24 00:30
By:Isaac Francis

India’s regulators are showing a preference for Central Bank Digital Currencies (CBDCs) over private cryptocurrencies like Bitcoin (CRYPTO:BTC) and Ethereum (CRYPTO:ETH), signaling a move toward stricter regulation. 

The government has expressed concerns over the instability and misuse risks posed by private digital currencies, leaning toward a total prohibition. 

In contrast, CBDCs are seen as a secure alternative that could meet financial inclusion goals without the potential risks. 

The Reserve Bank of India (RBI) has backed this stance, emphasising the benefits of CBDCs. 

According to RBI Governor Shaktikanta Das, the digital rupee, introduced in 2022, now boasts over 5 million users and involves 16 participating banks. 

Das highlighted the advantages of CBDCs, noting their capacity to provide efficient financial services, particularly targeting vulnerable sections of society. 

With the pilot projects gaining traction, the Indian government plans to expand the digital rupee’s usage domestically and explore cross-border applications to enhance international trade and remittances. 

The relationship between cryptocurrencies and India has been complex. 

While the Supreme Court lifted a 2018 ban on crypto transactions in 2020, the government has since maintained a cautious stance, classifying cryptocurrencies as Virtual Digital Assets (VDAs). 

India imposes a 30% tax on crypto earnings and a 1% TDS on transactions over INR 10,000. 

Despite acknowledging the potential of blockchain technology for specific use cases, such as tokenizing government securities, Indian regulators remain wary of private digital currencies. 

This cautious approach follows the 2023 synthesis paper endorsed by the Financial Stability Board and the International Monetary Fund, which recommended increased regulation of cryptocurrencies. 

In the current regulatory landscape, CBDCs are emerging as the preferred choice for India’s digital financial strategy. 

As consultations and regulatory decisions progress, India’s focus remains on maintaining tighter controls over private cryptocurrencies while promoting a state-backed digital currency framework.

At the time of reporting, the Bitcoin price was $66,650.08, and the Ethereum price was $2,521.39.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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