Reserve Bank of India governor wants to ban cryptocurrencies

The governor of the Reserve Bank of India (RBI) also compared cryptocurrency trading to gambling and emphasised crypto’s potential to undermine the bank’s authority and lead to the dollarisation of the Indian economy, which would be against the country’s sovereign interest.

He also claimed that cryptocurrencies have no underlying value even though some people refer to them as assets or financial products. Moreover, he touched on the market prices of cryptocurrencies and concluded that they are solely based on speculation. 

RBI’s efforts to regulate the cryptocurrency market 

In January 2023, the Reserve Bank of India has released a financial stability report that focused on digital currencies. The report said that the Indian economy and domestic financial system remain strong in the face of strong global challegnes.

However, when it comes to virtual currencies, the RBI remained sceptic over the future of the asset class and highlighted the risk that it poses to the broader financial industry. The report cited some of the recent disasters linked to digital assets, including the collapse of Terra, FTX, and the lineup of top projects that halted withdrawals for users. 

India’s central bank noted that the only way to minimise the risks posed by the volatile asset class is through a common approach to regulation. The report suggested the use of the ‘same-risk-same-regulatory-outcome’ principle which would see the virtual currency service providers being regulated in the same manner as banks.

RBI’s retail CBDC pilot includes blockchain features

In December 2022, the RBI has launched CBDC pilots in the wholesale and retail segment, with the retail pilot including blockchain-based components. According to a statement issued by the Union Minister of State for Finance, the wholesale segment pilot is named Digital Rupee - Wholesale, and it was launched on 1 November 2022. 

This pilot is limited to the settlement of secondary market transactions in government securities. It also aims to explore how the digital rupee could improve the efficiency of the inter-bank market by anticipating the need for a settlement guarantee infrastructure or for collateral to mitigate settlement risk.  

The retail version of the CBDC is taking on the form of a digital token that represents legal tender, and it is being issued in the same denominations as paper currency and coins.