I. Central Bank Regulatory Architecture

All central banks follow 3-tier classification - now codified in MiCA Recital 7: CBDC and digital assets issued by central banks acting in monetary capacity should NOT be subject to cryptoasset framework.

Core Principle: Only INR including physical rupee and RBI's digital e-Rupee is recognized as official currency in India. Crypto = VDA under Income Tax Act, taxed at 30% but not regulated as money.

II. India - RBI e-Rupee Framework - The Most Detailed Central Bank DFA Model

Legal Basis:

• Finance Act 2022 amended RBI Act 1934 Sec 2 - "bank note includes bank note in digital form"
• RBI launched pilot: Wholesale e-Rupee (e₹-W) Nov 1, 2022 for G-Sec settlement, Retail e₹-R Dec 1, 2022

Design:

Two Forms:

• Retail e-Rupee (CBDC-R): For P2P and P2M, stored in wallets issued by select banks (SBI, ICICI, HDFC). Uses token-based model - each e₹ is unique token issued by RBI.
• Wholesale e-Rupee (CBDC-W): For interbank settlement.

Distribution: 2-tier indirect model - RBI issues to banks, banks distribute to customers. Banks do KYC, AML, not RBI directly. Preserves bank intermediation.

Key Regulatory Rules (RBI Retail Sandbox Oct 8, 2025):

• Non-interest bearing: Like cash, e₹ will not carry any interest, preventing disintermediation of bank deposits
• No wallet limit anonymity: Small value offline transactions allowed with limited anonymity, large value fully KYC'd - balances privacy vs AML
• Interoperability: RBI enabled CBDC wallet users to scan UPI QR codes for payments. Brings e₹ on par with UPI usability. Long-term goal: Cross-border CBDC interoperability via Project mBridge
• Legal Tender: Must be accepted for payments

RBI Stance on Stablecoins: RBI views stablecoins as "Private Money, Inherently Unstable," lacking core attributes of modern money, posing macro-financial risks. Frameworks like US GENIUS Act treat them as Regulated Payment Instrument, but RBI rejects G7 model, champions CBDC as superior risk-free alternative maintaining full central bank control.

III. Russia - Federal Law No. 259-FZ On DFA - Central Bank of Russia Model

Effective Jan 2021:

• DFA Defined: Digital rights comprising monetary claims, rights to securities, equity in non-public JSC, right to demand transfer of securities - issued via entry in distributed ledger by DFA Exchange Operator licensed by CBR.
• Prohibition: DFA cannot be used as means of payment within Russia.
• Digital Currency (Crypto): Separate category - can be owned but not used for payments.

2026 Amendments:

• CBR amendment requires commercial banks to include customers' cryptocurrency and DFA information in balance certificates - bringing crypto into official banking reporting
• New Article 164.2 Criminal Procedure Code and Article 104.1 Criminal Code: crypto seizure during search - investigators can choose method depending on storage (hardware wallet seizure, exchange freeze). Law effective Sep 1, 2026.
• New rules: Direct P2P and self-custody wallets restricted - must trade via licensed DFA operators.

IV. US & EU Central Bank Position

US Federal Reserve: No retail CBDC. Executive Order 2025 prohibits establishment, issuance, use of CBDC citing risks to financial stability, privacy. Focus on regulated stablecoins via GENIUS Act and bank-issued tokenized deposits.

EU ECB: Digital Euro in preparation phase since Oct 30, 2025, pilot mid-2027 conditional on Regulation. ECB will issue, but distribution via banks under PSD2.

V. Case Laws

CASE 1: Russian USDT Lending - Property Rights of Stablecoins - Moscow Case 2023-24

Facts: Moscow resident Dmitry Timchenko lent 1000 USDT in 2023, borrower refused repayment.

Defence: USDT not DFA under Russian law, not subject to digital currency circulation rules, therefore loan void.

Court Holding: Several regulatory experts stated fiat-pegged stablecoins like USDT do not fall under category of DFA in Russian law and are not subject to digital currency circulation rules. Court held individual HAS property rights to USDT and other stablecoins - can be object of civil transaction as "other property" under Civil Code Art.128. Enforced repayment.

Lesson: Stablecoin ≠ DFA under 259-FZ, but still protected as property. Central bank cannot claim stablecoin is illegal per se - gap in regulation.

CASE 2: Russia - 2026 Law and FSB Crypto Seizure Case

New Law: Article 164.2 CPC sets out how digital currency seized during investigative actions. Allows seizure via private key transfer, exchange freeze.

First Application: FSB case 2026 - seized BTC from suspect's hardware wallet during search, transferred to CBR custody wallet.

Significance: First statutory recognition of crypto confiscation procedure, establishing CBR custody as legal.

CASE 3: SEC v. Coinbase, Inc. - S.D.N.Y. 2023-2025 - What is DFA vs Security

Facts: SEC charged Coinbase June 2023 with operating unregistered securities exchange, broker, clearing agency. Alleged 12 tokens traded were securities. SEC asked Coinbase to halt trading all digital assets except BTC before suing.

Holding: Judge Katherine Polk Failla held SEC's complaint plausibly supported claim that crypto firm was selling unregistered security - rejecting Coinbase motion for judgment on pleadings. Case allowed to proceed.

Later: SEC voluntarily dismissed case against Coinbase in Feb 2025, shifting toward crypto-friendly approach, granting MiCA approval in EU, Coinbase added to S&P 500.

Lesson for Central Banks: Court distinguished between Bitcoin (commodity) and tokens that are investment contracts under Howey. Central bank must decide: Is your DFA a security token (CBR) or payment token (RBI)? Different regulator.

CASE 4: Coinbase v. SEC (3d Cir. 2025) - Need for DFA Rulemaking

Facts: Coinbase petitioned SEC to create rules clarifying application of federal securities laws to digital assets, arguing current framework does not account for unique attributes, making compliance economically and technically infeasible.

Holding: Court recognized regulatory gap - existing securities laws not designed for tokenized assets with embedded compliance.

Lesson: Led to US shift to token taxonomy: ERC-3643 permissioned securities now accepted as compliant DFA structure.

CASE 5: Internet and Mobile Association of India v. RBI - Supreme Court 2020 - RBI Ban Overturned

Facts: RBI Circular April 6, 2018 banned banks from dealing with VDAs.

Supreme Court Holding (March 4, 2020): Quashed RBI ban as disproportionate under Article 19(1)(g). RBI had not shown actual harm, had not considered less restrictive measures. Banks can provide services to crypto exchanges with KYC.

Aftermath: Led to current framework: Crypto = VDA taxed under IT Act, but regulated by RBI for AML via PMLA inclusion 2023, and CBDC as separate legal tender.

CASE 6: SEC v. Ripple - Institutional Sales = Securities - 2023-25

Holding: Institutional sales of XRP $728M constituted unregistered securities offerings, programmatic sales on exchanges did not.

Implication for Central Bank DFA Operators: If you issue DFA via private placement to institutions, you need securities prospectus under FinSA (Swiss) or SEBI. If retail via exchange, different regime.

VI. Compliance Checklist for DFA Operator / Bank

1. License: In Russia - get DFA Exchange Operator license from CBR. In India - Bank must be part of RBI CBDC pilot, get approval for wallet issuance.
2. Issuance: DFA issuance requires information memorandum + registration with CBR. e₹ issuance only by RBI.
3. AML: All DFA transactions subject to Travel Rule (IVMS101), KYC via bank, blockchain analytics.
4. Reporting: Include DFA holdings in balance certificates (Russia 2026 rule), in India report to RBI Central Repository.
5. Consumer Protection: Cannot claim DFA = CBDC. Must disclose: DFA is not legal tender, not protected by deposit insurance.

Central banks are converging: CBDC for payments, DFA/tokenized securities for investment, both under central bank oversight, crypto as property.