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Deputy Governor T Rabi Sankar said on Thursday that the RBI is developing on a gradual launch of its digital money and is considering pilot programs in the wholesale and retail sectors to begin soon.
In addition, he stated that some nations have adopted particular purpose Central Bank Digital Currencies (CBDCs) in the wholesale and retail sectors.
“RBI Is Developing Digital Money,” says Sankar
A CBDC is a digital form of legal currency issued by a central bank. It is the same as fiat cash and may be exchanged for it one for one.
According to Sankar, establishing a domestic CBDC may give the public applications that any private virtual currency (VC) provides, thereby ensuring popular support for the rupee.
“It may also defend the public from the unusual amount of volatility that some of these VCs suffer,” he added during an online debate hosted by The Vidhi Centre for Legal Policy.
“CBDC adoption might result in a more stable, efficient, trustworthy, regulated, and legal tender-based payment option.
There are risks, without a doubt, but they must be properly balanced against the potential benefits.” He elaborated
According to the Deputy Governor, the RBI would make every effort “as we go forward in the direction of India’s CBDC” to take the necessary steps to reinforce the country’s leadership in payment systems.
He believes that in the future, CBDCs will be in the armory of every central bank.
This will need both thorough calibration and a smart deployment plan.
The RBI Has Also Been Researching The Benefits And Drawbacks Of Introducing CBDCs
Sankar emphasized the need for brainstorming and stakeholder discussions, as well as considering technological obstacles.
“RBI is now working on a phased deployment approach and analyzing use cases that may be deployed with minimal or no interruption,” he explained.
The RBI is looking into many important concerns, including the scope of CBDCs, the underlying technology, the validation method, and the distribution architecture.
“However, conducting pilots in the wholesale and retail categories may be a possibility soon,” stated the Deputy Governor.
Sankar went on to say that legislative modifications will be required because the present provisions of the Reserve Bank of India Act were designed with cash in physical form in mind.
According to him, changes to the Coinage Act, Foreign Exchange Management Act (FEMA), and Information Technology Act will be necessary as well.
“Every thought, as they say, must wait its turn. Maybe the time has come for CBDCs” He remarked on it.
He also emphasized some of the hazards involved with digital currencies, such as a rapid withdrawal of funds from a stressed-out bank.
“There are dangers involved… but they must be properly weighed against the possible advantages,” he noted.
In 2017, the finance ministry established a high-level inter-ministerial group to investigate the policy and legislative framework for regulating virtual/cryptocurrencies.
It had proposed the use of CBDCs as a digital form of fiat money in India.