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India Is Exploring Central Bank Digital Currency

On 25 January 2021, The Reserve Bank of India (India’s central bank) said, it is investigating whether it wanted to implement the country’s Central Bank Digital Currency (CBDC) and if so, how to operationalize it. As digital currency usage has risen globally, governments around the world (like Digital Euro, China, France, South Korea, Sweden, Japan, Venezuela, Lebanon, Bahamas etc.) are discussing and testing the possibility of releasing digital currency versions of their own.

A payment systems report issued by Reserve Bank of India (RBI) in 2021 said, innovations are changing the payments space rapidly. This has made central banks around the world to examine whether they could leverage on technology and issue fiat money in digital form. Previously in February 2020, RBI stated citing a central bank survey undertaken by the Bank for International Settlements, said that some 80 percent of the 66 central banks responding had initiated projects to explore the use of CBDC in some way.

A digital edition of the Rupee is one of the many ways in which RBI is considering increasing the implementation of digital payment systems in India, the report indicates. It also cites the methods by which “stored value component on cards” will allow digital payments offline via mobile phones.

 

 

The Reserve Bank of India report further stated that Private digital currencies (PDCs) / virtual currencies (VCs) / crypto currencies (CCs) have gained popularity in recent years. In India, the regulators and governments have been skeptical about these currencies and are apprehensive about the associated risks. Nevertheless, RBI is exploring the possibility as to whether there is a need for a digital version of fiat currency and in case there is, then how to operationalize it.

As per Livemint, “If it is completely controlled by the central authority like RBI, I don’t see the advantage of blockchain coming there. Cryptocurrencies are about trust established by people because of people. When it comes to RBI, it is trust established because of the central authority,” said Sathvik Vishwanath, chief executive officer and co-founder of cryptocurrency exchange Unocoin.

The RBI placed a ban on crypto-businesses in April 2018, but last March Supreme Court lifted the ban. This has helped crypto exchanges to reopen the country’s operations and dip into the world’s thriving crypto trading sector. Throughout the pandemic days, players like WazirX, Unocoin, Zebpay have hogged the limelight with a major shift in trading volumes. Sathvik Vishwanath said such a move will definitely help the goal of digitization and may also bring some boost to the cryptocurrency industry in India.

 

Report on Payment Systems in India (Click)

 

 

 

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Image: twitter.com/RBI/status/1143147169853181952/photo/1

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