The Union Budget 2022-23 has shed some light on the central government’s approach towards cryptocurrency. While the Budget has acknowledged such digital assets, a hefty tax structure is proposed. In addition, Union finance minister Nirmala Sitharaman pitched the idea of a Digital Rupee, India’s very own Central Bank Digital Currency (CBDC).
Does the introduction of such a CBDC make sense in light of the technological advancements in the payments space in India?
Why RBI Is Cautious About Cryptocurrency
The keynote address by T. Rabi Sankar, deputy governor of the RBI, in a conclave of the Indian Banks Association, makes a scathing assessment of where cryptocurrency fits within India’s monetary and economic framework. While noting that cryptocurrencies are neither currency nor financial or physical assets, Sankar believes that it is only a speculative asset working as a Ponzi scheme. These views were promptly echoed by RBI governor Shaktikanta Das, who cautioned against private cryptocurrencies. He highlighted that such cryptocurrencies threaten macroeconomic and financial stability and undermine its ability to deal with challenges on the two fronts.
These comments reflect the central bank’s (also the monetary policy regulator) fears about cryptocurrencies. It is pertinent to mention that the Supreme Court scuttled the RBI’s earlier attempts to place an outright ban on dealing with cryptocurrencies in 2020.