- RBI shelves plans to create CBDC
- Government has clamped down on cryptocurrencies
- The government may not yet have the capacity to create its own digital currency
The Reserve bank of India (RBI) has paused its plans to launch a digital token. The country’s central bank had planned the launch to help keep an eye on money laundering, black money, cyber security and related threats.
New year, old policies
The Hindu Business Line news outlet reported on January 1st that the Reserve Bank of India had changed initial plans to launch a digital currency after it clamped down on local cryptocurrency exchanges in 2018. The central bank had originally announced a plan to roll out a Central Bank Digital Currency (CBDC) in April 2018, saying at the time that it had created an interdepartmental group to study the project’s feasibility and potential advantages and file a report by June 2018.
Later in August RBI stated it had created the group stating the CBDC would be backed by the Rupee with reasons including the escalating cost of printing paper money and the rising popularity of digital currencies. The report of the group hasn’t been made public, but a source told the press:
“The government doesn’t want the digital currency any more. It thinks it is too early to even think about a digital currency.”
The change of heart by the Indian Government doesn’t come as a surprise since the Narendra Modi administration has continued to display hesitancy as far as cryptocurrencies are concerned. Cryptocurrency regulation came up last week and it appears that in India, digital currencies like Bitcoin will remain in the gray area into the foreseeable future, with a state minister telling parliament the government was approaching the entire issue with a lot of caution.
There was information that the government’s interdisciplinary committee on cryptocurrencies was considering legalizing cryptocurrencies, clarifying their status, which is in a curious limbo—since they’re neither legal nor illegal in India. There have been expectations that India would create a regulatory framework since 2018, amid the rising ire over the total ban by RBI on cryptocurrency transaction processing by banks.
Even though the RBI’s motivation for launching a digital Rupee based currency was to check “key concerns over black money, money laundering and cyber-security threats,” it may appear like RBI still does not have a formal unit to track technologies like blockchain and cryptocurrencies, which may be the reason for lack of preparation, according to the Hindu Business Line. The founder of Belfrics cryptocurrency exchange Praveen Kumar stated:
“It is premature for RBI to launch crypto-rupee, as more understanding of the crypto economy needs to be achieved. It is a right decision to delay the process and see how the publicly traded peer-to-peer economy is shaping up.”