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According to a report from the Business Standard, the RBI chief general manager at the Department of Payment Settlement, P. Vasudevan made the comment while speaking at the State Bank of India’s annual Banking Economic Conclaveon November 16.
Meanwhile, the RBI official said that the central bank is being cautious about issuing a CBDC, adding that having a digital rupee is not "a simple thing". Vasudevan further said that RBI is exploring various issues concerning a CBDC.
Some of these include whether the digital rupee should be retail or wholesale, and if the technology to be used for the CBDC should be semi-centralized or decentralized. In addition, Vasudevan said that the central bank is trying to see if intermediaries would be eliminated.
The RBI executive further said:
"And how do we actually have the validation mechanism as it is token based, and also how do you implement it? The banking system has been taking the lead in terms of currency distribution as a tiered model, whether the same model should be accepted for CBDC as well, we will have to see.”
This is not the first time that the Indian central bank is mentioning the subject of a digital rupee, the central bank has been considering the option of developing a CBDC.
Meanwhile in August, the RBI governor, Shaktikanta Das, said that the apex bank could begin CBDC trials by December 2021. However, the latest development indicates that the RBI postponed its decision.
While India is yet to work on a CBDC, more countries are already testing the digital versions of their sovereign currencies with China taking the lead. Nigeria became the first country in Africa to officially launch its digital currency.
The Indian government, meanwhile, has been working on how to regulate the cryptocurrency industry. Back in April 2018, the RBI banned commercial banks in the country to stop offering services to crypto businesses.
After a long legal tussle between the crypto community in India and the central bank, the Supreme Court reversed the RBI ban in March 2020. In January 2021, the Indian Parliament was considering introducing a bill that would effectively ban private cryptocurrencies.
However, lack of regulatory clarity has been an issue for cryptocurrency businesses in India. Meanwhile, a recent report by the Economic Times stated that the government is reportedly putting finishing touches on a legislation that would allow for the regulation, but it would not permit the use of cryptocurrency for payments.
Also, the bill would also prohibit "active solicitation" by crypto exchanges and platforms, according to the report. The RBI, meanwhile, continues to express concerns about crypto assets, stating that they pose a risk to the financial and economic stability, and is reportedly in favor of banning cryptocurrency.