RBI Eyes CBDC Launch in India, but Govt. Has No Plans for Crypto

Key Insights:

• A recent parliament session confirmed no plans to introduce cryptocurrency by the Indian government.
• RBI is working to introduce CBDC in phases and explore its use cases.
• The crypto industry seeks clarity on the ambiguities such as taxations and calculation.

In a Tuesday parliamentary session, the Indian government clarified that it has no plans to introduce cryptocurrency. Currently, cryptos are “unregulated” in India, said Minister of State for Finance Pankaj Chaudhary.

In a written note, Chaudhary answered questions posed by a Rajya Sabha – the upper house – MP, seeking an explanation on the government’s plan to introduce RBI-regulated cryptocurrency.

Government is not planning to introduce a #cryptocurrency that will be regulated by RBI: MoS Finance Pankaj Chaudhary in Rajya Sabha pic.twitter.com/lx7MW6X4u1

— All India Radio News (@airnewsalerts) March 15, 2022

Minister Chaudhary explained the difference between the RBI cryptocurrency and traditional paper currency. He said,

“RBI does not issue a cryptocurrency. A digital version of traditional paper currency is called CBDC.”

RBI Plans To Launch CBDC in Phases

Additionally, the minister told the upper house that the central bank of India is working on a phased implementation strategy for CBDC. He said in another reply that RBI is examining CBDC use cases that could be implemented with little or no disruption.

As reported by Economic Times, Chaudhary said,

“The introduction of CBDC has the potential to provide significant benefits such as reduced dependency on cash, higher seigniorage due to lower transaction costs.”

Last year, the Indian government proposed a bill – the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 – seeking to ban all private cryptocurrencies such as BTC, ETH, and XRP.

The RBI Deputy Governor Rabi Sankar, in a recent speech, stressed that banning private cryptocurrencies is the “best option” for the country, pointing out its uncompromising stand on the asset class.

He also said that private cryptos could wreck INR value, India’s monetary authority, and the government’s ability to control the economy.

Unclear Regulatory Environment

Following the Tuesday parliamentary sitting, the crypto industry players in the country are hoping for some clarity on multiple fronts from the current budget session.

The financial bill has been delayed repeatedly and has raised ambiguities among market participants on aspects including definition, taxations, and calculation.

In a recent move, even the Supreme Court of India asked the Centre to clarify its stance on the legal aspects of cryptocurrencies in India. Besides, Polygon co-founder Sandeep Nailwal agreed that India’s crypto “brain drain is absolutely crazy,” given the confusion over crypto regulation.

Vinu Peter Immanuel, Associate Partner, Link Legal, told ET,

“We expect the government to spell out the framework for the proposed digital/virtual rupee and clear the air on the legal status of the private cryptos.”

Other major economies like the US are moving in fits and starts regarding crypto regulations. The Biden administration recently proposed a much-anticipated executive order to strengthen crypto regulatory measures.