The CBDC report released by the central bank of India may not be good news for the Indian cryptocurrency market.
Crypto was such a hit in India in 2021 that it made the country the fastest growing market for the asset class, surpassing the MENA region and even Europe.
At one point, the country’s market was up 641% in just 12 months and was predicted to rise further.
But that all changed in April this year when the Indian government began tightening its grip on crypto, imposing taxes on transactions related to the asset that led to the collapse of local exchanges.
Some thought this might have something to do with the nation’s plan to have its own CBDC.
Officials in the country said the move was made to provide a window for cryptocurrency formalization, but what it has achieved so far is to make cryptocurrency trading in India incredibly expensive.
But it turns out that the country is just starting to crack down on digital assets, and the Reserve Bank of India could deliver the final blow.
Reserve Bank of India Eyes CBDC
It’s no secret that the Reserve Bank of India has been eyeing to launch a project for its CBDC, a development that has now been confirmed by the bank’s FinTech department report published on 7 October.
Both retail and wholesale variants of CBDC are being considered by consumer and corporate financial institutions, as well as interbank and wholesale transfers.
The report offered a glimpse of how the process will unfold, starting with the construction of the currency by technology partners selected by a working group.
Once the CBDC is ready, it will be tested in a sandbox environment and exposed to stressful situations. The functionality and overall design of the digital currency will be evaluated.
If the designed CBDC passes all tests, a pilot launch will follow.
An apparent aversion to cryptocurrencies
For the development of the retail and wholesale variant of the CBDC, the RBI ensures that it can correctly identify its owners or holders, in the same way as physical fiat money.
This move seems to attack one of the selling points and advantages of digital currencies like Bitcoin, Ethereum, XRP, among many others: privacy.
Also, since the government recently imposed heavy taxes on crypto transactions in India, people there will be in a position to instinctively choose CBDC to avoid taxes.
“It is the central bank’s responsibility to provide its citizens with a risk-free CBDC that provides users with the same experience of trading currencies in digital form, without any of the risks associated with private cryptocurrencies,” the RBI said amid quotes from Reuters. .
India may not have taken the step to ban cryptocurrencies altogether, but the CBDC report may be an indication that the country is slowly closing the door on non-government-issued digital currencies.
BTC total market cap at $374 billion | Featured image from Forbes, Chart: TradingView.com
