Crypto industry contradicts RBI, says CBDCs would not challenge VDAs

New Delhi: The central bank digital currencies (CBDCs) can ‘kill’ the so-called private cryptocurrencies or the virtual digital assets (VDAs), said Deputy Governor of Reserve Bank of India (RBI) T Rabi Sankar.

Ahead of the government’s consultation paper on these digital assets, the central bank continued to palpably denounce the cryptos. However, the industry has a different opinion.

“We believe that CBDCs could actually be able to kill whatever little case that could be for private cryptocurrencies,” Sankar said while speaking at a seminar organised by the IMF.

The RBI has been vehemently opposed to cryptocurrencies like Bitcoin, saying there is no underlying value for such instruments which are essentially speculative in nature. The government is yet to make its stance clear on them.

Anshul Dhir, Co-Founder & COO, EasyFi Network believes that CBDCs and cryptos will only complement each other rather than compete – unlike most naysayers.

Vikram Subburaj, CEO, Giottus, echoed a similar opinion, saying that CBDCs will not kill other cryptocurrencies as this seems to be part of RBI’s wish list. “They fail to see the myriad innovations taking place in the field.”

“A blockchain-based payment system with sovereign backing is unlikely to be a challenger for cryptocurrencies in general,” he added. Crypto assets like Bitcoin and Ethereum are public in nature and not private.

Earlier this week, the Department of Economic Affairs in the Ministry of Finance had said it will soon be coming out with a consultation paper on such private cryptocurrencies.

At a time when advocates of cryptocurrencies have been batting for ‘stablecoins’ which are linked to regulated currencies, Sankar said their ‘unquestioned acceptance’ seems ‘puzzling’.

He emphasised that one should understand the difference between money and currency and there is private money largely in the system.

According to the market players, CBDCs can be a good and authentic replacement for this class of cryptocurrencies, if implemented well. Stablecoins have their own challenges being pegged to a particular fiat currency.

“Stablecoins help with capital inflows and ease of transactions in the crypto ecosystem,” said Subburaj. “They are only a part of the utility that blockchain represents.”

The central banks would always be keen to work on a sovereign issued digital currency which can work in tandem with other foreign reserve stablecoins and CBDCs, Dhir said.

Sankar also appealed to the IMF to take the lead in structuring the narratives around digital payment systems given the rapid changes in technology.

A few of the market participants believed that RBI is over-critical of crypto assets. Though some of their concerns could be legit when it comes to the volatility of cryptos and the threat it has for many small investors, they say.

“In any fair argument related to new technologies, we welcome views for and against its adoption with key decisions taken after weighing the pros and cons,” Subburaj from Giottus said. “We would urge the RBI to also speak of the positive effects of this technology while they continue to highlight some drawbacks.”

Concerns can be eliminated by continuous discussions with stakeholders and industry leaders, Dhir from Easyfi said. “The RBI has to formulate policies conducive to innovation and growth.”

(With inputs from agencies)


(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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