-
The
Reserve
Bank
of
India
is
exploring
technology
as
a
means
to
address
privacy
risks
in
the
use
of
a
potential
digital
rupee,
a
senior
official
said. -
The
central
bank
likely
wouldn’t
object
if
the
government
backs
away
from
its
crypto
taxation,
according
to
the
official. -
The
RBI
may
be
open
to
startups
getting
involved
in
its
CBDC
pilot
programs
in
the
future.
India’s
central
bank
is
taking
a
very
cautious
approach
in
developing
its
digital
rupee,
a
senior
official
familiar
with
India’s
central
bank
digital
currency
(CBDC)
pilot
programs
told
CoinDesk,
though
it’s
making
some
progress.
The
Reserve
Bank
of
India
(RBI)
is
now
looking
into
technology
solutions
to
solve
privacy
concerns
posed
by
a
digital
rupee,
the
official
said.
While
the
bank
is
maintaining
a
careful
stance
on
crypto,
the
person
said,
it
wouldn’t
plan
to
object
if
the
government
decided
to
reduce
a
controversial
tax
that
has
stifled
the
crypto
industry.
The
RBI
isn’t
mandated
with
legislating
taxes,
so
that
decision
falls
out
of
its
purview.
However,
the
central
bank
has
stepped
beyond
its
role
before
to
try
to
ban
crypto,
so
its
apparent
willingness
to
stand
back
on
this
topic
may
be
noteworthy.
The
RBI
has
been
pushing
the
adoption
of
wholesale
and
retail
CBDC
since
late
2022
when
it
launched
its
pilot
programs.
India’s
central
bank
has
publicly
said
it
isn’t
in
a
hurry
to
implement
a
full-scale,
retail
CBDC
and
has
not
shared
any
timeline.
But
recent
events
suggest
a
quiet
urgency.
Numbers
timeline
Last
month,
its
retail
CBDC
hit
a
milestone
of
a
million
transactions
in
one
day,
but
only
with
a
little
help
from
its
friends,
the
banks.
At
least
one
bank
revealed
internally
it
had
been
encouraged
to
deposit
employee
funds
and
benefits
in
CBDC
rather
than
fiat
currency
to
help
the
RBI
hit
that
milestone.
The
official
declined
to
reveal
whether
the
milestone
has
become
a
daily
occurrence
or
whether
banks
would
continue
to
deposit
employee
funds
in
CBDC.
The
banks
reportedly
involved
in
this
exercise
–
HDFC
Bank,
Kotak
Mahindra
Bank,
Axis
Bank,
Canara
Bank,
IDFC
First
Bank
and
Union
Bank
of
India
–
did
not
respond
to
CoinDesk’s
requests
for
comment.
“The
evolution
of
a
CBDC
requires
experimentation
and
considerable
efforts
to
make
it
a
secure
product
for
the
nation,
and
that
can
take
time,”
the
official
remarked.
“The
settlement
aspect
is
easy,
but
latency
could
be
better.”
Privacy
in
digital
rupee
The
Indian
central
bank
has
added
another
narrative
to
the
question
of
privacy
in
CBDC
usage,
which
has
been
a
point
of
concern
for
institutions
and
lawmakers
around
the
world,
including
former
U.S.
president
and
currently
the
leading
Republican
Presidential
candidate,
Donald
Trump.
Earlier,
CoinDesk
reported
that
the
RBI
would
ask
India’s
finance
ministry
to
provide
legal
backing
“in
the
form
of
legislation
that
will
allow
customers
to
delete
transactions
to
maintain
anonymity
if
they
so
choose
to.”
However,
the
central
bank
is
also
looking
for
answers
to
the
privacy
question
through
technology.
“A
privacy
legislation
is
not
the
only
way,”
said
the
senior
official.
“Other
ways
to
tackle
this
problem
–
particularly
technology
–
do
exist,
and
our
team
is
exploring
that,
too.”
RBI
and
tax
reduction
The
RBI
–
one
of
the
staunchest
opponents
of
crypto
in
India
and
globally
–
would
not
register
an
objection
if
the
Indian
government
chose
to
reduce
its
stiff
taxes
on
crypto,
the
senior
official
said.
“Not
only
are
taxes
not
in
our
mandate
or
domain,
it
is
also
not
our
concern,”
the
official
said.
“This
is
about
legislation,
and
that
is
for
the
government
to
decide.”
The
RBI
has
a
history
of
wanting
crypto
to
be
banned.
It
had
effectively
prohibited
crypto
between
2018
and
2020
until
a
Supreme
Court
order
overturned
that
effort.
Since
then,
the
central
bank
has
expressed
its
concerns
about
crypto
publicly
and
in
several
forums
such
as
the
Group
of
20,
where
India
led
coordination
for
global
regulation
in
the
space.
If
it
maintains
neutrality
on
the
industry’s
biggest
ask
–
the
reduction
of
taxes
–
that
could
surprise
many.
A
reduction
of
taxes
could
boost
crypto
trading
volumes,
which
is
something
the
RBI
has
argued
could
risk
India’s
monetary
stability.
A
few
days
after
CoinDesk’s
interview
with
the
senior
official,
India’s
finance
ministry
chose
not
to
reduce
the
nation’s
stiff
taxes
on
crypto.
Such
announcements
are
usually
made
as
part
of
the
budget,
and
no
change
was
expected
because
it
was
an
interim
spending
plan
ahead
of
national
elections
within
two
months.
A
full
budget
is
expected
in
July
2024,
and
that’s
where
the
crypto
sector
may
pin
its
hopes.
The
industry
has
been
pushing
for
a
reduction
in
the
taxes
–
particularly
the
1%
tax
deducted
at
source
(TDS)
on
every
transaction,
if
not
the
30%
tax
on
profits.
The
argument
against
the
1%
tax
may
have
greater
weight
after
a
study
from
a
think
tank
revealed
data
that
didn’t
justify
the
tax
and
instead
sought
a
0.01%
tax.
The
RBI’s
opposition
to
cryptocurrencies
has
remained
constant.
Even
the
recent
approval
of
spot
bitcoin
exchange-traded
funds
(ETFs)
by
the
U.S.,
didn’t
change
its
stance;
RBI
Governor
Shaktikanta
Das
said
India
doesn’t
need
to
emulate
anyone,
as
the
emerging
economies
cannot
afford
the
risk
from
crypto.
Startups
and
India’s
CBDC
The
RBI’s
CBDC
pilots
could
see
the
involvement
of
startups
in
the
future,
the
official
revealed.
As
technology
takes
center
stage
in
the
evolution
of
CBDCs,
startup
founders
in
the
crypto
and
tech
space
have
contended
that
pilots
could
benefit
from
their
involvement.
“India’s
startups
have
the
potential
to
help
with
the
nation’s
CBDC
pilots,”
said
Aritra
Sarkhel,
head
of
corporate
development
at
ANQ,
a
digital
banking
platform
in
India.
“Not
only
could
startups
build
on
India’s
CBDC
but
also
contribute
to
the
technology
challenges
that
may
arise
as
the
pilot
evolves.”
Other
nations
such
as
Australia
have
seen
private
organizations
take
part
in
the
exploration
of
CBDCs,
but
India
has
so
far
made
this
an
in-house
affair
led
by
the
fintech
department
of
its
central
bank.
