The introduction of a Central Bank Digital Currency (CBDC) will not abolish cryptocurrencies and stablecoins, as they satisfy different objectives, said Chief Economic Adviser V. Anantha Nageswaran on Thursday.
“Will CBDC effectively end even cryptos, let alone stablecoins? My answer is no to both of that because the underlying objective for cryptos to emerge is…basically, it’s about tax evasion, money laundering, and speculation. And CBDC is clearly not a vehicle for evasion and speculation,” he said.
Speaking at a webinar organised by the Indian Council for Research on International Economic Relations, ‘Getting Central Bank Digital Currency (CBDC) Right for India: Lessons from G20 and the Rest of the World’, the CEA said, “In the presence of CBDCs, neither stablecoins nor cryptos would actually disappear because they satisfy different objectives. Therefore, they have to be tackled separately from other regulatory instruments. The advent of CBDC will not obviate the need for regulatory instruments as well.”
In the 2022-23 Budget, finance minister Nirmala Sitharaman said that the introduction of CBDC will give a big boost to the digital economy. She also proposed a new tax structure for cryptocurrency investors. The transfer of any virtual or cryptocurrency asset will be taxed at 30 percent.
While the Centre is working on its own CBDC to be launched this year, the Reserve Bank of India (RBI) has been opposed to the idea, calling it worse than Ponzi schemes.
Quizzed on the speed with which central banks have been working on their digital currencies, CEA Nageswaran said the momentum was partly driven by “group dynamics”.
He quoted RBI Deputy Governor T. Rabi Sankar to say that there is very little actual evidence and actual experience to be able to fine-tune and launch (a CBDC). “Right now, there is also a feeling—if I may say so—that we should not be left behind in this because if we are kind of left behind, we might be considered somewhat technologically backward,” Nageswaran said.