• bitcoinBitcoin$70,560.002.80%
  • ethereumEthereum$3,562.302.55%
  • elrond-erd-2MultiversX$60.971.21%

India Considers Using Digital Currency

The Reserve Bank of India declared Monday that it is exploring the possibility of creating a digital version of the rupee.

“Private digital currencies or virtual currencies or cryptocurrencies 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, the 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,” the central bank commented.

The creation of a CBDC could lead to the best of both worlds – the security and convenience of cryptocurrencies and the regulated money circulation of the traditional banking system.

“This has made central banks around the world examine whether they could leverage on technology and issue fiat money in digital form,” the RBI said.

Easy Steps

Up until recently, RBI has had a suspicious view of virtual currencies, citing, of course, their use in money laundering and drug trafficking.

In April 2018, for example, RBI banned crypto, which resulted in great damage to several investors who, inspired by the global market, started investing in crypto.

Still, as a result of increased demand for crypto regulations, the Supreme Court of India struck down RBI’s ban.

“But with a few countries (such as Sweden, Russia, Iran, China, Japan, and the USA) already testing their CBDCs, the RBI too has now realized that there is a need to explore the feasibility of digital money,” Dinkar Kalra, a fintech lawyer, and a solicitor at the Courts of England and Wales declared.

“If regulated properly, a cryptocurrency in the form of a CBDC can offer a number of advantages in terms of reducing paper currency. India is keen on reducing the use of paper currency to check the generation of illicit or unaccounted money and monitor the flow of money and monetary transactions,” he added.

Working on It

The RBI commented that the change from a cash-based economy to a digital one is a “work in progress,” one that may take a long time to carry on.

“Considering the diversity of users in the payment ecosystem, there is still a long road to be traveled, especially across geographies and societal cross-sections like senior citizens and migrant workers,” the RBI declared.

“One of the concerns around CBDC is whether it can be decentralized. Generally, cryptocurrencies are based on the blockchain system which means that such systems are usually decentralized and rely on maths rather than a single third party. However, the RBI as a monetary regulator is a single entity so whether there would be any decentralization when RBI conceptualizes the CBDC would be interesting to see,” said Jaideep Reddy, a technology lawyer at Nishith Desai Associates.

This means that, as of now, it is not clear whether RBI would mandate a CBDC holder to keep an account with itself or whether it would ask the banks to operate the CBDC accounts.

Previous articleNext article

Leave a Reply

Your email address will not be published. Required fields are marked *