India is considering banning cryptocurrencies like Bitcoin and Ether as it focuses on the adoption of its own Central Bank Digital Currency (CBDC), the digital rupee. According to a report from the Hindustan Times, key officials concluded that the risks posed by private cryptocurrencies outweigh their benefits. The discussions took place ahead of a forthcoming government paper on crypto regulation.

CBDCs vs. Cryptocurrencies

Officials argue that the digital rupee, India’s CBDC, offers the same advantages as private cryptocurrencies but without the associated risks. While stablecoins and decentralized digital assets provide flexibility, the government remains wary of potential threats to financial stability, as highlighted by both the Reserve Bank of India (RBI) and Finance Ministry.

IMF Recommendations and India’s Response

Earlier this year, a paper by the International Monetary Fund (IMF) and the Financial Stability Board (FSB) suggested a balanced regulatory approach instead of an outright ban. However, Indian regulators have indicated they could impose stricter measures, including a full ban on private cryptocurrencies, as they retain the flexibility to adopt more stringent regulations.

India’s Long Journey with Crypto

India has had a tumultuous relationship with cryptocurrencies. In 2018, the RBI banned banks from processing crypto transactions, but the Supreme Court lifted the ban in 2020. Since then, regulatory uncertainty has persisted. Despite increased scrutiny and a 30% tax on crypto profits, India has yet to finalize a formal crypto framework. However, RBI officials remain vocal about the risks posed by digital assets, while simultaneously supporting blockchain technology for social benefits.