India is once again weighing up a crypto ban in order to boost adoption of the digital rupee, while the Russian regulator warns banks of penalties. A new report suggests tokenization has little risk of jeopardizing financial stability.
For all the key details of new Distributed Ledger Technology (DLT) projects in the banking world, real-world asset (RWA) tokenization, stablecoins, and central bank digital currency (CBDC) updates, the Observers 'Banking and CBDC Roundup' weekly has you covered.
It's been a torrid time to be a crypto investor in India for some time now. Taxes on transactions and capital gains have shot through the roof, there have been messy legal battles over the status of digital assets, and the community was left reeling after major exchange WazirX suffered a devastating $233 million hack.
And if all that wasn't enough, a new report from the Hindustan Times suggests that Indian regulators are once again considering an outright crypto ban in order to encourage further adoption of the digital rupee.
According to the article, the likes of Bitcoin and Ether could be outlawed in the country of 1.4 billion people because this CBDC also offers speedy transactions. One official who wished to remain anonymous told the news outlet:
"CBDCs can do whatever cryptos do. In fact, CBDCs have more benefits than cryptos, minus the risks associated with private cryptocurrencies."
Of course, Indian Bitcoiners may take umbrage with this statement — raising concerns about privacy and the risk of transactions being monitored.
Elsewhere, officials at Norway's central bank have confirmed that they'll make a concrete recommendation on whether to launch a CBDC next year, but insist they aren't concerned about falling behind major economies.
Deputy Central Bank Governor Pal Longva told Bloomberg that "we are studying complex issues and we have a lot to consider and assess," with the U.K. and U.S. also facing accusations of dragging their heels.
Just 3% of transactions performed by consumers in Norway use cash as a payment method, one of the lowest worldwide. And while this may appear to make a CBDC redundant, regulators are increasingly concerned that privately owned infrastructure could cut central banks out of the picture in the years to come.
Meanwhile, the Lord Mayor of London, Michael Mainelli, has warned that while CBDCs can help clamp down on financial crime, this would be at the detriment of law-abiding consumers. He told a Digital Pound Foundation event that assurances about privacy from the government may prove to be inadequate — and predicted a scenario where new restrictions are imposed after a terror attack and never repealed.
Arguing that governments would still have the ability to increase oversight over transactions, even if they are never used, Mainelli added:
"It's hard to put a technological genie back in the bottle."
Staying on the topic of "Britcoin," Bank of England Governor Andrew Bailey has told a seminar in Washington that a digital pound would not replace cash in the U.K. — doubling down on statements he's made before.
Bailey believes, however, that the money infrastructure is crucial, and the progress on modernizing it by commercial banks has been slow.
Absent innovation in commercial bank money, central banks may be left as the only game in town insofar as retail payments innovation is concerned. That is not my preferred outcome, but not one that we should rule out.
Banks in Russia estimated the cost of integrating the digital ruble into their systems at around USD 2 million. While the large systemic banks are digitally advanced and already use pilot digital ruble systems, for smaller commercial banks, this is a significant hurdle. Around 200 second-tier and 100 third-tier banks are required to start providing digital ruble transactions from July 2026 and 2027, respectively.
The complications come from the fact that smaller banks in Russia often operate on software from multiple vendors and each would require integration with the digital ruble system. The Governor of Bank of
Meanwhile, talking at the Finopolis forum, the Governor of the Central Bank of the Russian Federation, Governor Elvira Nabiullina, said that they plan to fine banks for failing to meet the deadline for connecting to the digital ruble platform.
This week we observed the reports from two retail CBDC pilots: Thailand and Ghana.
Thailand CBDC pilot report focused on transactional and network analysis. It was found that neither participating banks nor retail users wanted to keep hold of the non-interest-bearing new asset class and used it merely for one-off transactions.
Ghana's eCedy report is more comprehensive, with beautifully arranged results and conclusions. The project is implemented with one of the largest CBDC technology contractors, Giesecke+Devrient (G+D). Images, graphs and surveys – all show positive results of the test runs, but the "Bank of Ghana has no immediate plans to fully launch the eCedi, given the more pressing need to prioritize economic stabilization."
The Financial Stability Board says tokenization has little chance of jeopardizing the global economy, primarily because it only represents a small slice of activity in this bustling sector. However, it warned this could change if the industry scales up substantially and "if some vulnerabilities are not adequately addressed through oversight, regulation, supervision and enforcement."
And perhaps suggesting that proponents of this technology are getting a little bit ahead of themselves, the board wrote:
"The potential benefits of tokenization may include improved efficiency, including in clearing and settlement, reduced costs, increased transparency, and greater flexibility, including expanded opportunities for investors. However, many of these benefits have yet to be proven, may not be uniquely achievable through tokenisation, and may involve trade-offs that might negate the benefits."
Nonetheless, Fed Board member Christopher J Waller struck a bullish tone during a speech at a workshop in Austria, when he argued this still-nascent technology could serve as a complement to centralized finance rather than a threat.