CBDC vs. Bitcoin & Ethereum: Why Experts Recommend Central Bank Digital Currency
Government Consultation Favors CBDC Over Private Cryptocurrencies
Key institutions and regulators consulted by the government are advocating for a ban on private cryptocurrencies such as Bitcoin and Ethereum. Experts argue that any advantages these digital assets provide, particularly in benefits transfer, can be achieved more efficiently through the Central Bank Digital Currency (CBDC). According to insiders, these discussions are being held in preparation for a government discussion paper on cryptocurrency regulations.
Risks of Private Cryptocurrencies Outweigh Benefits
The consensus among policymakers is that the risks associated with cryptocurrencies, including stablecoins, significantly outweigh their benefits. “CBDCs can replicate the functionalities of cryptocurrencies while offering greater security and stability,” stated an anonymous government official. The official also expressed concerns over the reliability of stablecoins, which are pegged to physical assets like gold.
India’s Stance on Cryptocurrency Regulation
India, as a member of the G20, adopted the International Monetary Fund (IMF) and Financial Stability Board (FSB) synthesis paper in September 2023. This paper outlines a regulatory framework with a minimum threshold but allows individual countries to impose stricter measures, including complete bans on private cryptocurrencies. Officials also highlighted the potential of blockchain technology beyond cryptocurrency, such as tokenization of government securities, targeted credit distribution, and subsidies.
RBI Governor Advocates for CBDC Adoption
Reserve Bank of India (RBI) Governor Shaktikanta Das recently emphasized the transformative potential of CBDC at a conference in Bengaluru. He pointed out that the programmability feature of digital currency could enhance financial inclusion by ensuring targeted fund distribution. India launched its CBDC, the digital rupee (e₹), in the wholesale segment in November 2022, followed by a retail pilot in December. The retail CBDC now has over 5 million users and participation from 16 banks.
CBDC’s Potential for Cross-Border Transactions and Future Plans
Government officials believe that CBDC has immense potential for both domestic and cross-border transactions. With promising results from pilot projects, authorities plan to expand CBDC applications gradually, analyzing real-time data to enhance its functionality.
Conclusion
With growing concerns over the risks of private cryptocurrencies, India’s government and regulatory bodies are favoring the adoption of CBDC. By leveraging blockchain technology for secure transactions, targeted benefits distribution, and financial inclusivity, CBDC presents itself as a safer and more efficient alternative to cryptocurrencies like Bitcoin and Ethereum.
