RBI To Launch Digital Rupee3 min read
Since the beginning of time, it might have seemed like the RBI and digital currency would never go hand in hand.
Why did it seem like this?
Well, RBI had pulled the plug on cryptocurrency back in 2018 through a blanket ban. Though this action was reversed in March 2020, the Indian crypto space still walks on eggshells around RBI, fearing that tight regulations could come knocking on the door at any moment.
But then came along CBDC (Central Bank Digital Currency) and we realized that central banks were never really against digital currencies. The issue was the governance and hence, risk of the cryptocurrency.
India might soon get it’s own digital currency or CBDC, said Deputy Governor of RBI, T Rabi Sankar in a conference on Jul 22, 2021.
What is CBDC (Central Bank Digital Currency)?
CBDC is virtual money with the same functionalities as the currency notes tucked away in our wallets i.e. fiat currency. Simply put, it is our Rupee in a digital format.
So now, the obvious question that lies is..
What Is The Difference Between CBDC and Cryptocurrency?
CBDC is backed and issued by a country’s central bank, which in India’s case, is RBI. Whereas cryptocurrencies are decentralized and fall under no regulation!
CBDC is thus a legal and legitimate form of a virtual coin.
How Did CBDC Come About?
RBI acknowledges that digital currencies are the need of the hour but at the same time, is not convinced with cryptocurrency due to lack of regulation.
So, CBDC offers the best of both worlds!
Rabi Sankar said in a statement, “Cryptocurrencies such as Bitcoin, do not necessarily fit into the RBI’s definition of currency” which is why RBI along with central banks across the world are assessing CBDC as an alternative to the volatile crypto asset.”
In fact, 86% central banks in the world are researching CBDC, out of which 60% are experimenting with it and 14% are already in the pilot testing phase, as per a study by the Bank of International Settlements (BIS).
Status of India’s CBDC
Sankar revealed that the RBI has been analyzing the pros and cons of CBDCs for a while and that RBI is working towards a phase-wise implementation plan for it’s digital currency or CBDC whilst it assesses use cases for it.
The plan is to put CBDC into play with minimal disruption.
“Developing our own CBDC could provide the public with uses that any private virtual currency can provide and to that extent might retain the public preference for the Rupee,” stated Rabi Shankar.
He also indicated that CBDC’s existence in wholesale and retail markets is a possibility.
What Does CBDC Mean For India?
This digital currency will help lower our dependence on cash & facilitate smooth international transactions.
“It would be RBI’s endeavour, as we move forward in the direction of India’s CBDC, to take the necessary steps which would reiterate the leadership position of India in payment systems,” assured Rabi Shankar.
One thing is for sure – A new & modern India seems to be coming into play, wouldn’t you think?
Disclaimer – This content is purely for informational purpose and in no way advice or a recommendation.