The Reserve Bank of India has said it will pilot a digital rupee for specific use cases and also released a concept note on Central Bank Digital Currency (CBDC).
Indian central bank announces digital rupee trial
The note aims to create awareness about such currencies in general and the planned features of the Digital Rupee in particular.
“The e-rupee will provide an additional option to the currently available forms of money,” the RBI said.
“It is substantially not different from banknotes, but being digital it is likely to be easier, faster and cheaper. It also has all the transactional benefits of other forms of digital money.”
As for the concept note, it discusses key considerations such as technology and design choices, possible uses of digital rupee and issuance mechanisms.
It also examines the implications of introducing a CBDC to the banking system, monetary policy, financial stability, and analyses privacy issues.
RBI said it broadly defines CBDC as the legal tender issued by a central bank in a digital form. It is akin to sovereign paper currency but takes a different form, exchangeable at par with the existing currency and accepted as a medium of payment, legal tender and a safe store of value.
CBDCs appear as liability on a central bank’s balance sheet, as opposed to digital payments and digital wallets that are made from funds held on account at a bank, which are the holding banks liability.
In the Union Budget for 2022-23, the finance minister said the RBI would roll out a digital equivalent to the rupee in the current financial year.
In an interview last month, RBI Deputy Governor T Rabi Sankar said that the central bank will launch its digital currency as a pilot project this year.
CBDC is the most efficient system for cross-border payments, he said. Though, he reiterated that the RBI aims to give viable alternatives and not aiming for a cashless society.
Sankar had earlier said that CBDCs can “kill” whatever little case that exists for private virtual currencies like Bitcoin.
India’s central bank has vehemently opposed cryptocurrencies such as Bitcoin and expressed serious concerns about cryptocurrencies in general. The RBI said they do not have underlying value for such instruments which are essentially speculative in nature.
Finance Minister Nirmala Sitharaman had during her budget speech in February also proposed a 30% levy on gains from transfer of virtual digital assets, which has been implemented from April 1.
However, the government has yet to clarify its stance on whether cryptocurrencies would be regulated or banned.
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