India Considers Ban on Private Cryptocurrencies

Indian regulators are considering a ban on private cryptocurrencies like Bitcoin and Ethereum, emphasizing the benefits of Central Bank Digital Currencies (CBDCs).

Reports from The Hindustan Times indicate that key government bodies believe CBDCs can deliver similar advantages with fewer risks.

Officials have expressed concerns that the risks associated with private cryptocurrencies currently outweigh their benefits. This perspective aligns with India’s endorsement of a recent IMF and FSB synthesis paper advocating minimum regulatory standards, allowing for stricter measures, including outright bans.

RBI Governor Shaktikanta Das has highlighted CBDCs’ potential for enhancing financial inclusion, with the digital rupee (e₹) already attracting over 5 million users since its pilot launch in late 2022. The State Bank of India (SBI) is also piloting CBDC initiatives to support tenant farmers.

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India’s cryptocurrency stance has evolved significantly since the RBI’s 2013 warning. A Supreme Court ruling in March 2020 lifted the RBI’s ban on crypto transactions, leading to new regulatory proposals. While cryptocurrencies are not legal tender, they are classified as Virtual Digital Assets (VDAs), subjected to a 30% tax on profits and a 1% Tax Deducted at Source (TDS) on transactions over INR 10,000.

The government recognizes blockchain’s social benefits but remains cautious about private cryptocurrencies. Plans to expand the CBDC framework will rely on insights from pilot projects, with a clear preference for promoting CBDCs over private digital currencies.

Alexander Stefanov