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The Reserve Bank of India (RBI) is working on a phased implementation strategy for its central bank digital currency (CBDC) program.
India Considers Running CBDC Pilot Programs
The Deputy Governor of RBI, T. Rabi Sankar, said the bank is investigating the issuance of a CBDC and may consider running a series of pilot programs to that effect. While speaking at a conference organized by the Vidhi Center for Legal Policy, Sankar said introducing a CBDC would help protect the Indian populace from volatile private digital assets. According to the deputy governor, a phased introduction of a digital Rupee would allow time for needed legal changes to the country's foreign exchange rules. Sankar said that several issues would be examined before CBDC implementation could be considered. He added that security or privacy concerns and how retail payments would be organized would also be looked into.
"Some key issues under examination are – (i) the scope of CBDCs – whether they should be used in retail payments or also in wholesale payments; (ii) the underlying technology – whether it should be a distributed ledger or a centralized ledger, for instance, and whether the choice of technology should vary according to use cases; (iii) the validation mechanism – whether token-based or account-based, (iv) distribution architecture – whether direct issuance by the RBI or through banks; (v) degree of anonymity etc."
While the Indian government has shown signs of interest in CBDC previously, that has not been the same with cryptocurrencies. The country has exhibited various attempts to ban cryptocurrencies outrightly. Earlier this year, the government hinted at its plans of introducing a law to ban private cryptocurrencies. The legislation had sought to prohibit cryptocurrencies while allowing for certain exceptions to promote blockchain technology. However, the mood has somewhat changed in recent months, with signs of the country taking a moderate approach and regulating the crypto market.
CBDCs Making Progress In Different Countries
CBDCs have gained a lot of attention over the past year. Several countries have moved forward to study and implement CBDC pilot tests in the wholesale and retail segments. South Korea recently chose Ground X, a blockchain subsidiary of a local internet company Kakao, as the technology provider for the pilot tests of its digital Won. According to local media agency Korea JoongAng Daily, Ground X would participate in the South Korean CBDC project alongside US-based blockchain company ConsenSys. Other Kakao affiliates like KakaoBank and Kakao Pay would also participate. The European Central Bank is also making progress. Last week the bank approved an investigation phase for a CBDC, which would last for 24 months. This stage would focus on addressing issues surrounding design and distribution.