RBI Opposed To Crypto But Ready To Float CBDC; Ministry of Finance assesses options, AND BFSI

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NEW DELHI: The Reserve Bank of India (RBI) has not been shy about being against cryptocurrency, ever since it first appeared on the horizon in the country a few years ago.

RBI Governor Shaktikanta Das has actually called for its outright ban, while making his views on the matter clear on several platforms over the past couple of years.

“Crypto should be banned, given that it has no underlying value in the market. Like any asset, every financial product has an underlying value, so the value of crypto is totally based on the imaginary factor,” he said in January. this year at a media event.

“Crypto is a form of gambling with no underlying value and is nothing but a world of 100% speculation,” he said at the same event, while calling for it to be banned.

If crypto is allowed in India, the RBI could likely fail in transaction monitoring, Das said.

The RBI Governor went on to say that crypto masquerading as a financial asset is a completely misplaced argument.

Calling crypto as a form of gambling, Das said gambling is not promoted in India and if people still want to indulge in it, there is a need to establish proper rules for it, while calling for an outright ban.

He said cryptographic products need to be looked at, and going forward, the effort is to develop an international framework, an international architecture to deal with this problem.

What happens to the CBDC? Although the RBI has been vehemently opposed to cryptocurrency, its own Central Bank Digital Currency (CBDC), which had been launched as a pilot project on December 1, 2022, for retail use, is ready to target one million users by the end of this month.

This was informed by the RBI on Thursday during the post-repo rate announcement press conference.

While it doesn’t have a specific date in mind for a full-fledged CBDC launch, the central bank will take a measured approach, she said.

The RBI also plans to make the United Payments Interface (UPI) platform fully interoperable with the CBDC.

“We are not aiming for a specific date, it will be a calibrated approach,” T. Rabi Sankar, Deputy Governor, RBI, had said on June 8.

“We want to assess the impact and learn as we go. By the end of June, we are aiming for 1 million CBDC users. We also plan to make the UPI QR code interoperable with CBDC,” he said. added.

Regarding a complete ban on cryptocurrencies, in July 2022 Finance Minister Nirmala Sitharaman said that a position could only be taken after considerable international collaboration on the risks, benefits, evolution of a common taxonomy and standards.

“Cryptocurrencies are by definition borderless and require international collaboration to prevent regulatory arbitrage. Therefore, any regulatory or prohibition legislation can only be effective after significant international collaboration on risk assessment and the benefits and evolution of taxonomy and common standards,” Sitharaman said. Parliament said in a response.

Earlier this year, however, at the meeting of G20 Finance Ministers and Central Bank Governors (FMCBG) held in Bangalore in February, it was decided that once the International Monetary Fund ( IMF) and the Financial Stability Board (FSB) are said to have formulated a technical paper with the aim of achieving a coordinated global approach for the regulation of crypto assets as proposed by India’s G20 Presidency, it will form the basis of future discussions for develop an international architecture.

Sitharaman had said after the FMCBG meeting that the cryptocurrency regulation was discussed by a panel on February 23, 2023 and would come back again at the meeting scheduled for July 2023.

A synthesis of the two studies – by the IMF and the FSB – would be considered in September this year, which will lead to the creation of a comprehensive policy approach on this issue (regulation of cryptocurrency), she had informed.

Posted Jun 11, 2023 1:21 PM IST

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