Co-founder and CEO of CoinDCX Sumit Gupta recently underlined the need for cryptocurrencies like Bitcoin and Central Bank Digital Currencies (CBDCs) to coexist since each has distinct functions in the digital economy. Gupta argues against seeing these two forms of digital currency as rivals in the ongoing debate over India’s legislative approach to digital assets, instead supporting a complementary connection that might strengthen the financial system.
Gupta emphasized the key distinctions between cryptocurrencies and CBDCs in a recent piece. Central bank-issued and regulated CBDCs provide a regulated way to carry out monetary policy, controlling interest rates, liquidity, and inflation. While this centralized structure could stabilize the economy, it may also mimic traditional financial issues like inflation, which some fear could limit their potential as a transformative technology.
Gupta admits that some members of the cryptocurrency community are worried that CBDCs might resemble “digital fiat.” Skeptics claim that CBDCs lack the decentralization that attracts people to cryptocurrencies, and they caution that this centralized digital currency could face the same inflationary concerns as traditional fiat currencies. Many proponents of cryptocurrency contend that decentralization promotes financial freedom and transparency, two ideals they feel CBDCs fail to follow.
I just read an article on @htTweets where an anonymous expert compares CBDCs to crypto and claims, 'CBDCs can do whatever cryptos do.. CBDCs have an edge over bitcoin’'
— Sumit Gupta (CoinDCX) (@smtgpt) October 23, 2024
I humbly disagree with the above statement. CBDCs and crypto assets serve different purposes and shouldn't be… pic.twitter.com/QJS5DowmQx
The possible regulation—or even outright prohibition—of private cryptocurrencies in India is a topic of continuous discussion. Gupta noted the substantial talent and startup ecosystem in India’s Web3 industry and expressed hope about the country’s receptivity to financial innovation. He emphasized that any prohibition on private cryptocurrencies may hinder the development of blockchain technology and discourage business endeavors, both of which are vital to the nation’s digital economy.
Gupta promotes a well-rounded framework that addresses financial stability and encourages innovation as India develops its regulatory strategy. He asserts that this strategy would allow cryptocurrencies and CBDCs to collaborate, paving the way for a more efficient and inclusive financial system that leverages both centralized and decentralized benefits.
