In a webinar hosted by the International Monetary Fund (IMF) on June 3, RBI Deputy Governor T. Rabi Sankar discussed the possible impact of central bank digital currencies (CBDCs) on cryptocurrencies like BTC and ETH. He also emphasised that the Indian government and RBI refer to all non-government-issued cryptocurrencies, such as bitcoin and ether, as “private cryptocurrencies.”
According to reports, he stated:
“We (RBI) believe that CBDCs would actually be able to kill whatever little case there could be for private cryptocurrencies.”
According to Sankar, RBI is clear that cryptocurrencies should not be legalised “simply because they are supported by hi-tech.”
He continued:
“Any tool that can be used for good can also be put to undesirable uses. Technology, at the end of the day, is a tool.”
Meanwhile, the Indian government is drafting a crypto policy. According to the economic affairs secretary, the government is drafting a consultation paper on cryptocurrencies. RBI has long been emphasising that cryptocurrencies are a danger to India’s financial system and should never be recognised as legal tender, as several nations have done, notably El Salvador. The bank also cautioned that cryptocurrency might lead to the Indian economy being dominated by the dollar.
RBI Deputy Governor, Sankar, elaborated:
“A currency needs an issuer or it needs intrinsic value. Many cryptocurrencies which have neither are still being accepted at face value – not just by gullible investors but also by expert policymakers and academicians.”
He went on to say:
“Most cryptocurrencies have an equilibrium value of exactly zero, but they are still priced sometimes at fantastical levels. But even where cryptocurrencies do have value, for example, some stablecoins that are pegged to a particular currency, their unquestioned acceptance seems puzzling to me.”
Meanwhile, the Reserve Bank of India is now working on its own CBDC per the announcement made by Finance Minister Nirmala Sitharaman during the budget session-2022. The bank announced last week that it would issue the digital rupee in a “graded” manner.
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