“Every idea has to wait for its time. Perhaps the time for CBDCs is near,” said Sankar. “It will be RBI’s effort, as we move forward in the direction of India’s CBDC, to take the necessary steps to reiterate India’s leadership in the payments system.” The RBI is giving some consideration to the scope and regulatory framework of the proposed CBDC that is likely to coexist with cash and other forms of digital payments, Sankar said in a keynote address. virtual at Vidhi Legal Policy Center. “CBDC will be in the arsenal of most if not all central banks in the world,” he said.
‘Critical Stakeholder Consultation’
“Setting this up will require careful calibration and a nuanced approach to implementation. It is important to consider the drawing board and consult with stakeholders. However, conducting a pilot in the wholesale and retail segments could be a possibility in the near future,” said Sankar.
CBDC is a form of virtual currency or electronic money issued by a central bank as an alternative to central bank currency. These are largely stable coins backed by sovereign reserves and, unlike private crypto assets like Bitcoin or Ethereum, the value of these digital currencies is not subject to change. market volatility.
The deputy governor said the RBI defines a CBDC as a legal tender issued by a central bank in digital form. “It is like a fiat currency and can be exchanged 1-1 with fiat money. Only its form is different,” said Sankar.
With this, India joins China, Russia and the UK among the major economies evaluating the issuance of their own digital currency.
Citing a study by the Bank for International Settlements (BIS), Sankar said that 86% of the world’s central banks are working on CBDC while 60% are experimenting with it. Up to 14% of central banks are in the testing phase.
Sankar said the RBI is also closely examining some aspects of launching a general-purpose CBDC at a population scale. This includes scope – whether retail or wholesale; technology – distributed ledger or centralized ledger; validator – token or account-based system; and distribution format – issued directly by the central bank or banks.
He said that in order to launch a CBDC, a suitable regulatory framework would also need to be considered. This will include amendments to certain sections – 24,25,26 – of the RBI Act as well as provisions of the Coinage Act 2011, the Foreign Exchange Management Act and the Information and Technology Act. believe.
“RBI has been exploring the pros and cons of introducing CBDCs for quite some time,” said Sankar. “Overall, countries have implemented CBDCs with a specific purpose in the wholesale and retail segments. In the future, after studying the impact of these models, the launch of general-purpose CBDCs will be evaluated. RBI is currently working towards a phased rollout strategy and testing use cases that can be implemented with little or no disruption to India’s banking or monetary system. ”
There are several benefits to CBDCs, he said. These include reduced dependence on cash, savings in the cost of printing money as well as a more robust payment mechanism.
Another benefit highlighted by Sankar is the elimination of “time zone differences” in foreign exchange transactions, which could promote a cheaper and smoother international payment system.
Interestingly, Sankar also added that private virtual currencies like Bitcoin don’t fit the RBI’s definition of currency and one of the driving factors behind central banks around the world including India. The experiment with CBDCs is to reduce the risk of cryptocurrencies to the real economy.
https://economictimes.indiatimes.com/markets/forex/rbi-working-on-making-virtual-currency-reality/articleshow/84664503.cms | RBI is working on making virtual currency a reality