The Indian government has never particularly been a fan of cryptocurrencies, causing massive uncertainty in the industry. While a court ruling invalidated a ban on digital assets last year, the government appears set to attempt another one.
CBDC Good, Cryptos Bad
On Friday, the Lok Sabha Bulletin reported that the Indian government had introduced a new bill to the country’s parliament, proposing a ban on private cryptocurrencies like bitcoin.
Titled the Cryptocurrency and Regulation of Official Digital Currency Bill, the legislation seeks to ban the trade and use of private cryptocurrencies in the country, paving the way for the government to issue a Central Bank Digital Currency (CBDC).
The bulletin explained that while the bill is significantly anti-crypto, it also seeks to provide exceptions that will promote the underlying technology behind cryptocurrencies – most likely, blockchain technology. The bill is set for review by the Indian parliament in its upcoming budget season.
The Reserve Bank of India has indeed confirmed plans to explore the possibility of a CBDC. This week, the agency published a booklet on payments, explaining that it was looking into the need for a government-backed asset. It added that if it finds a necessity, it will look into appropriate ways to put digital assets into use for the economy.
As the booklet explained, cryptocurrencies have indeed gained popularity worldwide – especially in the past year. However, local government bodies and regulators remain skeptical and apprehensive about the assets. By stepping in, the Reserve Bank hopes to calm the space and provide a medium where everyone can use cryptocurrencies.
The Reserve Bank’s Role in Spreading Cryptophobia
The Reserve Bank has so far been quite vocal about its distrust for private cryptocurrencies. It placed a blanket ban on the assets in 2018, preventing local banks from serving crypto companies. However, Live Law reported last March that the Indian Supreme Court overruled its decision.
Even with the ban’s lifting, many reported that Indian banks are dealing with constant cryptophobia and were denying services to individuals and companies in the industry. Shortly after the Supreme Court’s action, Mohammed Dainish, a local FinTech lawyer, filed a representation with the RBI, denouncing banks’ decision to deny their services for digital asset sales or purchases.
The fact that the Reserve Bank has also not said anything supporting cryptocurrencies is a telling sign that the government remains overwhelmingly anti-crypto. Essentially, banks have either been emboldened to carry out their anti-crypto agendas or have been too scared of possible Reserve Bank pushback that they’ve decided to steer clear of crypto firms for now.