- Indian regulators are pushing for a ban on private cryptocurrencies like Bitcoin, favoring the central bank digital currency (CBDC).
- Despite government restrictions, India leads globally in crypto adoption, showcasing the public’s strong interest in cryptocurrencies.
In a significant move that could reshape the landscape of digital currencies in India, key government bodies and regulatory institutions are advocating for a complete ban on private cryptocurrencies like Bitcoin and Ethereum. This push towards banning private crypto assets comes as India seeks to promote the use of its own Central Bank Digital Currency (CBDC), the digital rupee, which the government argues is a more secure and beneficial alternative.
Government’s Stand Against Bitcoin
In consultations held in July 2024, multiple experts from the Indian government expressed their support for a blanket ban on private cryptocurrencies. A senior official, speaking on the condition of anonymity, explained the rationale behind this stance:
“CBDCs can perform all the functions that cryptocurrencies offer, but with added advantages and fewer risks.”
This reflects the growing conviction within India‘s regulatory circles that private cryptocurrencies pose a significant risk to the financial stability and security of the country.
India’s stance aligns with the recommendations set forth by the G20, a group of the world’s largest economies. In September 2023, India endorsed a joint report from the International Monetary Fund (IMF) and the Financial Stability Board (FSB), which encourages member states to impose stringent regulations on cryptocurrencies, potentially extending to an outright ban. Indian authorities, while emphasizing the risks associated with private cryptos, remain optimistic about blockchain technology, recognizing its potential for use in public services like tokenizing government bonds and optimizing the distribution of subsidies.
The Digital Rupee: A Strong Alternative
The Indian government’s growing support for the digital rupee, or e₹, further highlights its commitment to developing a state-backed digital currency. Launched as a pilot in November 2022, initially focused on wholesale transactions, the CBDC expanded to retail applications by December 2022. The project has since gained considerable momentum, boasting over 5 million users and involving 16 major banks.
The State Bank of India (SBI), one of the leading participants in this initiative, demonstrated the practical benefits of the digital rupee in pilot projects conducted in Odisha and Andhra Pradesh. These programs allow tenant farmers to access loans specifically tailored for purchasing agricultural supplies, showcasing the government’s ambition to use the CBDC for financial inclusion. The Reserve Bank of India (RBI) Governor, Shaktikanta Das, has publicly emphasized the role that CBDCs can play in advancing inclusive financial systems across the country.
Interestingly, while the Indian government continues to tighten its grip on private cryptocurrencies, the public seems to be moving in the opposite direction. India has become a global leader in cryptocurrency adoption, ranking first for two consecutive years among 151 countries, according to the latest Chainalysis report. Despite the regulatory hurdles, Indian citizens have demonstrated a growing appetite for crypto investments and blockchain technology.
This divergence between government policy and public behavior raises questions about the future of cryptocurrency in India. While the authorities push for a wider adoption of the CBDC, the rapid acceleration of crypto adoption by the population suggests that any attempt to suppress Bitcoin and other private cryptocurrencies could face significant resistance.