Crypto a force-multiplier for India's digital currency rollout

As India creates a CBDC, building on and leveraging off an existing crypto technological stack would be a safe option, especially one that has resisted nation-state attacks by the CCP.

- JAMES LEE

The list of bills has been released for the winter session of Parliament in the world's most populous democracy. This includes much-needed crypto regulation in India. Surprisingly, description of the crypto bill was verbatim to one introduced early this year, despite monumental developments in the crypto over the same period. These include China's ban, that ended up benefiting the US, and El Salvador's successful decision to make Bitcoin official legal tender.

It is important that there should be updates to the bill when taking into consideration new developments of such a magnitude. Furthermore, careful design is warranted with a crypto policy that has wide-ranging implications that go beyond the traditional scope of the Reserve Bank of India (RBI.)

The current bill ties two conjoined policies. First, it seeks to facilitate the introduction of a central bank digital currency (CBDC) to be issued by the RBI, and second, roll out a ban of private crypto in India. This second leg of the bill is to ensure a smooth rollout of CBDC, but could harm the project in practice.

Public comments by officials have suggested the ban would target the payment function of crypto. However, this focus on the payment function is misguided and counterproductive to the primary objective of a successful rupee CBDC rollout, in light of geopolitical risks not well covered in the current crypto policy consultation.