The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 is among the list of bills to be presented in this Parliament session. While its contents are unknown, it touches upon two things:
1. Initiating laws to make it easier for RBI to create its own CBDC (central bank digital currency)
2. Banning ‘private crypto assets’ with some exceptions
We laud the government’s intent towards creating a CBDC. Several central banks around the world have been working on CBDC, and India can’t be sitting on the sidelines while other countries experiment and launch their own digital currency. CBDC will reduce the cost of providing financial services and lead to greater innovations that will empower faster business operations globally.
However, the second part, which mentions banning ‘private crypto assets’ is concerning. It’s an incorrect term fuelled with misconceptions about crypto. Bitcoin, Ether, etc. are public crypto assets built on public blockchains and have their own specific use cases.
It’s also a misconception that CBDCs will render other crypto assets useless. They are digitised rupee, whereas crypto assets like Bitcoin and Ethereum have their own use cases. People use Bitcoin as a store of value, and Ethereum’s smart contracts to create decentralised applications (DApps). While CBDC would be helpful, it solves completely different problems compared to what existing crypto assets solve. Every blockchain needs its own native token to operate to maintain the sanctity of