China and India go all in on CBDCs as support for Bitcoin payments seesaws

What we’ve noticed: As the crypto payments market gains steam, lawmakers and regulators across the globe are trying to figure out how to regulate digital currencies effectively to ensure safety and legitimacy—a debate that took on a new sense of urgency after El Salvador became the first country to accept Bitcoin as legal tender.

Asia-Pacific leads the way: Here are the latest crypto payment moves from two of the biggest global markets.

  • China imposed strict regulations on Bitcoin mining and trading in May, which led to falling prices and a global trading slump. But the country is ramping up efforts to launch a central bank digital currency (CBDC): China has given out a total of $41.5 million in digital yuan through its pilot programs, and there are reports that it could be ready to roll out the CBDC after the Beijing Winter Olympics in early 2022. While 90% of the world’s central banks are looking into developing CBDCs, China is gearing up to be the first major economy to bring one to market.
  • Regulators in India are reportedly preparing to classify Bitcoin as an asset class “soon,” according to The New Indian Express—a complete reversal from a bill proposed in January that would have banned private digital currencies like Bitcoin and facilitated building a framework for a CBDC. Further pointing to changes, crypto exchange Coinbase said it will build out its presence in India, anticipating that interest in Bitcoin and a potential CBDC will hold in the country.

The bigger picture: When it comes to digital currencies, countries like CBDCs because they have parity with corresponding fiat currencies and can fit within the global banking system: Just days after international financial institutions called for global collaboration to make CBDC interoperable, central banks of Singapore and France successfully tested a cross-border network involving multiple CBDCs supported by JPMorgan’s blockchain infrastructure, Onyx. Bitcoin, on the other hand, faces an uphill climb toward being accepted as a currency amid concerns about its high volatility and utility as a payment method, but payment players are nevertheless diving into the space—signaling the asset may be able to overcome this skepticism. But for CBDCs and broader crypto payments to break into the mainstream, continued work toward interoperability will be key to ensure payment utility and enable cross-border transactions.