• The governor of the Reserve Bank of India (RBI), Shaktikanta Das, has suggested that cryptocurrencies should not be regulated but rather banned completely.
• India is one of an increasing number of countries working on their central bank digital currencies (CBDCs).
• The Central Bank announced that India would undertake the first pilot for retail digital currency on December 1, and that four local banks would participate in the initial phase of the pilot in four cities.
The Reserve Bank of India (RBI) has made a strong call for banning cryptocurrencies rather than regulating them. Governor Shaktikanta Das spoke at the Business Standard BFSI Insight Summit on Wednesday and made the case that allowing cryptocurrencies to grow could trigger the next financial crisis. Das cited the events in the industry this year, specifically the fall of the FTX exchange, as proof of his point.
Das argued that the origin of cryptocurrencies lies in the idea of bypassing and beating “the system,” and that they have “no underlying [value] whatsoever” and no credible argument about what public good/purpose they serve. He added that the term “private cryptocurrency is a fashionable way of describing what is otherwise 100% speculative activity”.
To combat these risks, the RBI has begun to embrace digital currencies in the form of central bank digital currencies (CBDCs). On December 1, the Central Bank announced that India would undertake the first pilot for retail digital currency and four local banks — State Bank of India, ICICI Bank, Yes Bank, and IDFC — would participate in the initial phase of the pilot in four cities: Mumbai, New Delhi, Bengaluru, and Bhubaneswar. Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank would join the pilot subsequently.
At the RBI’s monetary policy press conference on December 7, Das reported that feedback from the first pilot on wholesale CBDC had been very satisfactory, but that there were some learnings and the bank was working on them.
Though the RBI has made it clear that it stands against cryptocurrencies, it is continuing to innovate and prepare for the digital currency future. With its pilot program and further research, India is proving to be a leader in this space.