Is India banning cryptos? Here’s what you should know!

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  • Some regulators believe “private cryptos” should be banned
  • CBDCs continue to be supported by institutions in India

As a seasoned analyst with years of experience navigating the complex world of finance and technology, I find myself closely following the developments surrounding cryptocurrencies in India. The recent report suggesting that key regulators favor a ban on “private cryptos” like Bitcoin and Ethereum has raised some interesting questions about the future of digital assets in the country.

Over time, India’s connection with digital currencies has been quite intricate. This bond has gained attention lately as reports suggest that influential regulatory bodies in the country are leaning towards prohibiting decentralized cryptocurrencies such as Bitcoin and Ethereum. As per Hindustan Times, these authorities think that the benefits associated with such decentralized digital currencies can be achieved through Central Bank Digital Currencies (CBDCs) instead.

As a researcher, I find it noteworthy that the aforementioned report fails to provide any information regarding the specific officials or institutions aligned with this perspective. Consequently, it remains challenging for me to determine the extent of the government’s commitment towards this proposal.

Currently, the Indian administration is drafting a proposal about digital currencies, which could potentially lead to legislation in the future. The government has conducted numerous discussions on this matter over recent months, and at present, there seems to be agreement that the potential risks associated with cryptocurrency use surpass its advantages.

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In fact, one official claimed,

As a researcher delving into the realm of digital currencies, I find it intriguing to note that Central Bank Digital Currencies (CBDCs) share many functionalities with traditional cryptocurrencies. However, what sets CBDCs apart is their potential to offer even more advantages than their decentralized counterparts. The key difference lies in the mitigation of risks commonly associated with private cryptocurrencies.

As a researcher observing the trends within our nation, it’s evident that the asset class, particularly Bitcoin and Ethereum, is garnering increased popularity. While I can’t predict the government’s actions with absolute certainty, it seems plausible that they may eventually align themselves with these digital currencies.

Lack of “institutional confidence”

The shift in the current agreement regarding a specific asset class will hinge on trust built within the institutions about this asset class. For instance, the Governor of the Reserve Bank of India, Shaktikanta Das, has frequently expressed concerns about cryptocurrencies and their volatility. However, like many government officials, he has also praised Central Bank Digital Currencies (CBDCs), while acknowledging potential risks associated with cryptos.

India’s Finance Minister Nirmala Sitharaman holds similar opinions too.

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In 2023, India followed a recommendation from an IMF-FSB synthesis paper, which suggested against a complete prohibition of cryptocurrencies. Yet, the paper also provided room for imposing more stringent regulations on this category of assets. Currently, it appears that India may be favoring this stricter regulation approach.

Crypto-entities feel the heat too!

Not just cryptos, but crypto-entities have been on the wrong side of the Indian government too.

Let’s take Binance as an example. In January 2024, India prohibited the use of its crypto-exchange app and platform due to allegations of non-compliance with anti-money laundering regulations. However, this ban was lifted in August, but only after Binance had registered itself as a reporting entity with India’s Financial Intelligence Unit (FIU).

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2024-10-24 13:43