Digital Currency: India own Central Bank Digital currency

India’s central bank, the Reserve Bank of India is progressively moving towards launching its own Central Bank Digital Currency (CBDC). For this RBI will follow a “phased implementation strategy”.

RBI Deputy Governor T Rabi Shankar is sure that CBDCs will be a positive move in India, which is seeing a rise in cryptocurrency investments. RBI’s strategy also includes a pilot study to test a CBDC as a general-purpose digital currency, which will probably be the world’s first fiat digital currency. Currently, countries that have opened up their economies to cryptocurrencies include El Salvador and Cuba.

What is CBDC?

The idea of CBDC is not a new development. According to the keynote address delivered by T Rabi Shankar in July this year, it was James Tobin, an American Nobel laureate and economist who suggested in the 1980s that the US Federal Reserve Bank should provide a widely accessible medium of transaction to the public. can do.

Except currency notes, all fiat money (currency notes and coins) or representative money (cheques, drafts, securities and bonds) can be treated as a CBDC. Many of them are now just electronic transfers and documents, which in fact fit to be CDBC. Many of the world’s central banks are now closer to having their own digital version of their fiat money.

“A CBDC is legal currency issued by a central bank in a digital form. It is similar to fiat currency and is one-to-one exchangeable with fiat currency. Only its form is different,” the keynote speech says.

RBI specifies whether a CBDC is a digital or virtual currency, but it cannot be compared with private virtual currencies that have emerged over the years. The idea of private virtual currencies is in contrast to the historical concept of money.

The RBI agrees that CBDCs are currently at the top of the minds of many central banks in countries around the world. Many of them have reached the stage where a pilot project has been started and some other countries have installed Special Purpose Vehicles (SPVs).

In the case of Sweden, the RBI has a ready reckoner which has popularized its own electronic form of currency and works like fiat money. But the pilot project that RBI has launched may have to go beyond the financial aspect, but also take into account some social aspects.

Need of CBDC in India?

One of the scales employed by the RBI to assess the need for a CBDC is the Electronic Interface Receipts and Payments. India is currently the world leader in digital payment innovations. Its payment systems are available 24X7, available to both retail and wholesale customers, they are largely real-time, and transaction costs are probably the lowest in the world.

It is very likely for the RBI to issue its own CBDC soon as there is a roaring influx of private virtual currencies rushing into the fray of public payments and exchange for goods and services. Many multinationals operating from India in both retail and wholesale accept private virtual currencies as a payment interface.

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