The Indian Reserve Bank could seriously consider pushing ahead with its central bank digital currency (CBDC) in a move that is expected to help push out the usage of private cryptos and stablecoins in the long run.
India has not been very welcoming of private cryptos over the last couple of years. After making some feeble attempts to block their usage, which was strongly opposed by the crypto community in the country which went ahead and got the ban revoked by the Supreme Court, the government now seems to be mulling bringing in a comprehensive law to restrict its usage. The authorities and the regulators believe that the private cryptos are difficult to track and so those who use them would be able to earn profits that cannot be tracked and hence the government would not be able to earn any kind of revenue from their usage. The regulators hope that bringing in the CBDC would help to bring about a change in the attitude of the users as they would then prefer to use a digital currency that is approved by the government rather than using private cryptos and face its wrath.
The Cryptocurrency and Regulation of Official Currency Bill 2021 are likely to be brought in over the next few months which is likely to explain the regulations surrounding the private cryptos and how the CBDCs would be introduced and used. Recently, the finance minister Nirmala Seetharaman said,” you’d think common people don’t care about digital currency, but the public took to the streets against the move. It’s not a question of literacy or understanding. It’s also a question of to what extent this is a transparent currency; is it going to be a currency available for everyone. There are other countries that are talking about the central bank having a legitimate cryptocurrency. That could be a possibility.”
It is indeed a race around the world for the introduction of CBDCs but it is indeed a big challenge for large countries like India, the US, and China as they would need to study the various aspects of the introduction of CBDCs into the financial ecosystem and also its long term impact both internally as well as on its financial interaction with other countries as well. China is likely to be the first major country to introduce the CBDC in the first half of next year and it has already conducted several tests around it, as per reports. This would be an interesting case study for other countries when this happens.