India’s Central Bank working towards implemention of digital currency
The Deputy Governor of the Reserve Bank of India, T Rabi Sankar, has said that the central bank was working towards a phased implementation of a central bank digital currency and is in the process of introducing it for wholesale and retail segments shortly.
This is the first and strongest signal yet from the central bank on the launch of a digital currency and he added that the time was ripe for the same and that many other central banks were also working towards the goal.
“Like other central banks, RBI has also been exploring the pros and cons of the introduction of CBDC for quite some time,” he said. “Conducting pilots in wholesale and retail segments may be a possibility in the near future. So, some progress has been made. You know we could likely come up with this in the near future,” he added.
The bank felt that the CBDCs were needed to protect the users from other cryptos which were highly volatile and posed a huge risk to the users and also to the financial system. So, it was looking into areas where digital currencies can be introduced with little to no impact on the financial and monetary system as such.
He also added that changes were needed to the monetary laws as they were written with physical cash in mind at that time and hence had to be changed to handle the legal aspects of digital currencies. Some of the key issues being looked at by the bank include the risk of flight of funds whenever a bank is under stress. Other key aspects include the scope of CBDCs, the type of technology that needs to be used, and the validation mechanism as well.
India joins the long list of over 60 countries that are busy with launching their own digital currencies and this list includes the Eurozone, Switzerland, France, Israel, etc. It is still not clear which of these banks are using their own customised technology or whether they are opting for Ripple (XRP) or Ethereum. But the rise of digital currencies could mean that the likes of Bitcoin and other cryptos could be at risk. Already, their volatility is a put-off for many users who want to use them as a payment mechanism, and hence we are seeing that a lot of users , who want to use cryptos for payments, are moving towards stablecoins. This is going to reduce the other cryptos to purely speculative instruments with no real-world value for them, in the long run, except for the fact that they provided a nice melting pot for others to realise the utility of digital currencies.