RBI-backed CBDC likely to feature in crypto bill: official

Terming the Centre’s bill as a response to the central bank’s concerns about macro-economic stability, the official in the know of discussions on the upcoming legislation said the “government’s response is not to ban cryptocurrencies but rather to provide cryptocurrency via the RBI.”

The Bill, slated to come up in the winter session of Parliament beginning on Monday, aims to also ensure that the Reserve Bank of India (RBI) does not lose control of the country’s monetary economics while minimising speculative betting around cryptos, the source said.

“Unregulated cryptocurrencies can destabilize the macro-economy and create big speculative bubbles. To that extent, the RBI is right,” the person added.

The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, due to be introduced in the next session of Parliament, has triggered an industry-wide stir, as the Lok Sabha website in its briefing on the legislation states that it “seeks to prohibit all private cryptocurrencies in India” but allows for “certain exceptions to promote the underlying technology and its uses”.

In recent days, the price of major cryptocurrencies in the country has seen wide fluctuations as investors await greater regulatory clarity.

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Measured approach

Acknowledging that crypto and blockchain are here to stay world over, the official said India will adopt a gradual approach to digital currency.

“The government’s approach to crypto may be careful, measured and evolving, we will start with a CBDC. ( the central bank) will launch that and in future there may be RBI authorised and regulated private stable coins,” said the person, while noting that “ functionally and theoretically, they (cryptocurrencies) disintermediate the conventional players in financial markets like bank accounts or credit cards and play that role.”

Earlier this month, Prime Minister Narendra Modi had
chaired a high-level meeting on cryptocurrencies with officials from the RBI, finance ministry, and the Securities and Exchange Board of India (Sebi). Quoting a person aware of the discussions at the meeting, ET had reported that the overall view within the government was that the steps taken should be proactive, “progressive and forward-looking” as (crypto) is an evolving technology.

Subsequently, the parliamentary standing committee on finance has met with crypto industry representatives, stakeholders and experts. Panel chairman Jayant Sinha had told ET that the committee hadn’t taken a view on cryptocurrencies, adding that the industry claimed 15 million registered users with total investments at Rs 600 crore.

Concerns have been rising over the increasing popularity of cryptocurrency as an investment.

“It is important that all democratic nations work on this (cryptocurrency) and ensure that it does not end up in the wrong hands, which can spoil our youth,” the PM had said at The Sydney Dialogue last week.