India’s “Cryptocurrency and Regulator of Official Digital Currency” bill will generate a facilitative framework for the Reserve Bank of India to issue an official digital currency and ban most private cryptocurrencies. The approach will create obstacles for thousands of peer-to-peer currencies that are currently thriving outside of regulatory scrutiny. 

Following the news, the price of bitcoin dropped by 1.19% and, according to coinmarketcap.com, was trading at $56,615.97 at 12pm CET on Wednesday. 

However, the announcement by the Indian government was not wholly unexpected. Earlier this month, prime minister Narendra Modi said that all democratic nations must work together to ensure cryptocurrency “does not end up in wrong hands, which can spoil our youth.” 

Earlier in the year, the Indian government considered criminalising the possession, issuance, trading, mining, and transference of crypto assets. According to Reuters, the government plans to ban private crypto assets while simultaneously paving the way for a new Central Bank Digital Currency (CBDC), which the government plans to launch by December this year. 

Speaking at the Economic Affairs Committee in the Lords on Tuesday, Sir Jon Cunliffe, the BoE’s deputy governor for financial stability, said that the bank has made a “prudent assessment” of the 20% move. Cunliffe also said that banks could potentially lose a revenue stream from payments as a consequence of the move, adding that if banks are strong enough, they will be able to adjust to the change. 

Cunliffe also said that there is a future in cash too, stating it would have an anchoring role in the financial stability of systems.  

Since April this year, a potential digital pound has been on the horizon. In September, the BoE brought in representatives from big names such as Spotify, ASOS, and PayPal to consult on its CBDC Engagement and Technology forums. 

However, despite the potential of a digital pound approaching, Cunliffe warned that several issues need to be addressed before any CBDC is introduced into the UK. He said that the BoE did not yet have visibility on predicted customer uptake as it is currently unaware of what a CBDC would mean for the country’s economy. 

Central banks around the globe are exploring digital versions of their currencies to avoid leaving digital payments to the private sector amid a decline of cash use which has been partly accelerated by the pandemic. 

There has currently been no decision on whether such a currency will be introduced in the UK. The consultation, scheduled for 2022, will make up part of a research and exploration phase that will help the Bank of England and the UK government develop plans over the coming years. 

In a statement, the Bank of England said, “No decision has been made on whether to introduce a CBDC in the UK, which would be a major national infrastructure project. In April 2021, the Bank and HMT initiated the joint CBDC Taskforce to coordinate the exploration of a potential UK CBDC. The Bank also set up the Engagement and Technology forums, where relevant stakeholders from industry, civil society and academia provide strategic and technical input to the work on CBDC.”

The bank also said that the earliest date for the launch of a UK CBDC would be in the second half of the decade. 

A statement made on Thursday announced that the Swiss National Bank and the Banque De France will look into the feasibility of a cross-national arrangement of two wholesale central bank digital currencies (CBDCs) on blockchain. The SNB has enlisted a private sector consortium (including R3, UBS, and Credit Suisse) which will be led by Accenture.

The two central banks will use a delivery-versus-payment mechanism to exchange a financial instrument against a euro wholesale CBDC and a euro wholesale CBDC against a Swiss franc wholesale CBDC. The arrangement will be settled between the Banque De France and the Swiss National Bank.

The move represents an expansion of Project Helvetia, an experiment between the Swiss National Bank, the Bank of International Settlements Innovation Hub Swiss Centre, and financial market infrastructure operator SIX. The project, which concluded in December, demonstrated the potential of integrating central bank money with tokenised assets.