India finally reveals why it is creating its own CBDC

India’s central bank finally provided an answer to one of the nation’s most pressing cryptocurrency concerns. T Rabi Sankar, Deputy Governor of the Reserve Bank of India (RBI), claimed: “private virtual currencies” are at “substantial odds” with the historical idea of money during a webinar hosted by the Vidhi Centre for Legal Policy, a major advocacy organization in India. He questioned the use of crypto assets as a substitute for commodities such as gold, claiming that cryptos had no “intrinsic value.”
The country’s business community has frequently inquired about the government’s concept of “private cryptocurrencies.”

The concept first was mentioned when it emerged on the agenda for the Budget session of Parliament in February-March. At the time, a measure was anticipated that would prohibit the usage of personal cryptocurrencies in the nation. While this alarmed the sector, numerous stakeholders emphasized that how the administration defines the phrase is critical.

“The digital currency bill to be introduced in the Lok Sabha is a welcome step. Its success will depend on the details, particularly the definition of what the bill calls ‘private cryptocurrencies’. This is not a common term. Bitcoin is not privately owned by anyone. It is a public good, like the internet,” said Rahul Pagdipati, CEO of crypto exchange and wallet ZebPay, at the time.

“Usually, certainly for the most popular ones now, they do not represent any person’s debt or liabilities. There is no ISSUER. They are not money (certainly not CURRENCY) as the word has come to be understood historically,” during his speech, Sankar stated.

This appears to imply that the central bank of the country is classifying all cryptocurrencies not under its supervision as personal cryptocurrencies.
Nevertheless, India Tech CEO Kailasam believes that India’s central bank, the Reserve Bank of India (RBI), as well as the Indian government may no longer be on the same page.

“When the crypto bill was going to be introduced during the Budget Session of Parliament, both the RBI and the government were on the same page,” Kailasam stated Business Insider in an earlier interview.

“But now — with the traction digital assets have gained over the last six months, suggestions for regulation and the Supreme Court’s judgement to ‘not’ ban cryptocurrencies in the limelight — the government is looking for a middle path.”

However, there are still concerns that the country would outright prohibit the exchange and use of Bitcoin, Ethereum, and other cryptocurrencies. Industry analysts have also claimed that doing so could harm the country’s budding blockchain sector, which includes companies like Polygon, which was recently financed by billionaire Mark Cuban.

One of the causes for the bank’s consideration of a central bank digital currency (CBDC), which it could supervise, according to the RBI deputy governor, was the “damaging social and economic consequences” of private cryptos. Sankar’s remarks highlighted the reality that India’s central bank, like many others, is concerned about the fact that cryptocurrencies are not just volatile, but also unregulated by governments.
To be fair, experts have expressed reservations about CBDCs, particularly about security.

Although financial transactions provide users with some anonymity, CBDCs are identifiable, allowing authorities to utilize them as network monitoring software.
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, was the name of India’s crypto bill, which was supposed to be introduced in Parliament during the Budget session earlier this year. It was also expected in the Parliament’s current monsoon sitting, but it has been put back even further. “It’s unlikely that the bill will get tabled during the upcoming session of Parliament,” said Kailasam. “The government is still in the process of determining whether or not to set up a new committee, keep the old one or have someone from outside come to chair the process.”

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