India's Central Bank Says CBDCs Can 'Kill' Any Case That Exists For Cryptocurrencies

A top executive of India's central bank said the launch of central bank digital currencies (CBDC) will "kill" cryptocurrencies. India is fast progressing down the path to launch of its own CBDC.

The Reserve Bank of India (RBI) has been quite vocal against cryptocurrencies and the blockchain industry in the previous years. The bank's Deputy Governor T Rabi Sankar said at an IMF conference in Singapore on Thursday, “We believe that central bank digital currencies (CBDCs) could actually be able to kill whatever little case that could be for private cryptocurrencies.”

Sankar also doubled down on RBI's belief by saying that the Unified Payments Interface (UPI), India’s in-house fiat-based peer-to-peer payments system, is more than capable to handle digital transactions in the country. "One of the reasons it is so successful is because it’s simple,” he said while pointing out the complexity of blockchain transactions.

“Blockchain, which was introduced six-eight years before UPI started, even today is being referred to as a potentially revolutionary technology. [Blockchain] use cases haven’t really been established that much at the speed it initially was hoped for,” Sankar said.

Sankar said that banks will always play an important role in providing liquidity in the market and that technology is just a means of payment and cannot become an actual currency.

“A currency needs an issuer or it needs intrinsic value. Many cryptocurrencies which are neither are still being accepted at face value. Not just by gullible investors but also the experts, policymakers or academicians,” Sankar said.

The RBI deputy governor believes that stablecoins like USDT should not be accepted blindly by nations due to the lack of transparency regarding the reserve assets backing these cryptocurrencies. Sankar said that the digital rupee will be more advantageous than stablecoins.

Interestingly, the digital rupee might be much closer than expected as the RBI plans to introduce the CBDC in a phased manner.

"The Reserve Bank proposes to adopt a graded approach to the introduction of CBDC, going step by step through stages of Proof of Concept, pilots, and the launch," the central bank said in the Annual Report on the Working of the Reserve Bank of India 2022.