Regulators in India are considering banning cryptocurrencies like Bitcoin and Ether while promoting the use of the digital rupee.

On October 22, local media reported that the government consulted with key institutions and regulators regarding private cryptocurrencies, including stablecoins, and concluded that the risks outweigh the benefits.

Central Bank Digital Currencies vs. Cryptocurrencies

According to an official, Central Bank Digital Currencies (CBDCs) can “do whatever cryptos do” but offer more benefits without the associated risks of private cryptocurrencies.

The specific parties involved in the consultation were not disclosed, but discussions reportedly took place ahead of a forthcoming government discussion paper on the topic.

Inter-Ministerial Group and Upcoming Discussion Paper

Earlier this year, India’s Secretary of Economic Affairs, Ajay Seth, stated that an inter-ministerial group, including the Reserve Bank of India and the Securities and Exchange Board of India, was working on a discussion paper to clarify the country’s stance on cryptocurrencies. This paper, initially expected in September, has been delayed.

Global Regulatory Perspectives

At the time, Seth referred to the IMF-FSB synthesis paper from July 2023, which advised against an outright ban on digital currencies, instead proposing a balanced regulatory approach. The paper also noted that countries could impose stricter regulations if needed.

“Whilst the IMF-FSB synthesis paper proposes to have a minimum threshold for regulation, it doesn’t stop any country from adopting higher restrictions, including a complete ban,” added an official.

Blockchain Technology: A Silver Lining

Despite the anti-crypto stance, officials remain optimistic about blockchain technology, citing its potential to enhance financial inclusion, tokenize government securities, and deliver targeted subsidies more efficiently.

India’s History with Cryptocurrencies

India’s relationship with cryptocurrencies has been turbulent. In 2018, the Reserve Bank of India banned banks from handling crypto transactions, but this ban was overturned by the Supreme Court in 2020.

Since then, regulation has been a topic of ongoing debate. Recently, India has been exploring its own CBDC.

Current Stance from Indian Authorities

Last week, RBI Governor Shaktikanta Das emphasized the benefits of CBDCs while voicing concerns about cryptocurrencies, citing potential risks to economic stability. Finance Minister Nirmala Sitharaman has also maintained that private cryptocurrencies cannot be considered legal tenders, though she supports regulating them.

Meanwhile, the Securities and Exchange Board of India has advocated for a multi-agency approach to crypto legislation and submitted suggestions to the finance ministry earlier this year.

Regulatory Measures and Taxation

India currently lacks a formal crypto regulatory framework but has imposed a 30% tax on crypto profits and a 1% TDS. Regulators have also increased oversight of the crypto trading market, requiring crypto service providers to be licensed.

For more on cryptocurrency news and updates, stay tuned to Global Crypto News.

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