Reserve Bank Of India Plans To Test Digital Currencies In The Near Future
The Reserve Bank is working on a strategy to roll out its digital currency in a phased manner and will launch it in the wholesale and retail markets in the near future. RBI Deputy Governor.
He said that the idea of a central bank digital currency (CBDC) has matured and many central banks around the world are working in this direction.
Shankar added that CBDCs need to protect consumers from the “terrible volatility” seen in some virtual currencies without government support.
He added that central banks around the world are involved in research into CBDCs, and some countries have also introduced such concepts.
"Perhaps the idea of the CBDC is close," he said during an online discussion hosted by the Vidhi Center for Legal Policy.
In India, a high-level inter-ministerial committee of the Treasury has reviewed the political and legal framework and recommended the introduction of a CBDC as a digital currency in the country.
“Like other central banks, the RBI has been researching the pros and cons of adopting CBDCs for some time,” he said, adding that countries, in general, have introduced CBDCs for specific purposes.
The Reserve Bank is currently working on a phased implementation strategy and is reviewing cases that can be implemented with little or no disruption to the banking system and monetary policy.
In the near future, this could be an alternative to launching pilot projects in the wholesale and retail sectors. So some progress has been made. You know we can do this in the near future," Shankar said.
The deputy governor said there is a need for a legal change as the current provisions have been made keeping in mind the physical form of currency under the Reserve Bank of India Act.
Follow-up changes are also needed in the Coinage Act, the Foreign Exchange Administration Act (FEMA), and the Information Technology Act, he said.
"These are just some of the things we see internally," he said. The Deputy Governor said that the key issues examined by the RBI included the scope, basic technologies, and verification process of the CBDC.
He also highlighted some of the risks associated with digital currencies, such as the sudden loss of money from a bank under pressure.
"There are risks ... but they need to be carefully weighed against the potential benefits," he said.