India’s central bank, Reserve Bank of India (RBI), says that a basic central bank digital currency (CBDC) model should be adopted initially and thoroughly tested to minimize the impact on monetary policy and the country’s banking system. The Indian umbrella bank sees several advantages in the launch of a digital rupee, including “a potential for improving the efficiency of cross-border payments”.
RBI describes the benefits of issuing digital currency and how to launch a CBDC with minimal impact
The Reserve Bank of India (RBI) released its “India Banking Trends and Progress Report 2020-21” on Tuesday. The 248-page report has a section on central bank digital currency.
“In its basic form, a central bank digital currency (CBDC) offers a secure, robust and convenient alternative to cash,” the Indian central bank described, adding that “depending on various design choices, it can also take the complex form of a financial instrument. The RBI continued:
Compared to existing forms of currency, it can offer advantages to users in terms of liquidity, scalability, acceptance, ease of transactions with anonymity, and faster settlement.
India’s central bank noted that there are “critical questions” about the design of a central bank digital currency that must be answered before it is introduced. For example, one question is whether the CBDC would be general purpose and available for retail use (CBDC-R), or would it be for wholesale use (CBDC-W) ”.
The RBI pointed out that “in a country like India, the decision regarding the distribution architecture, i.e. whether the CBDC would be issued directly by the central bank or through commercial banks, must be carefully weighed “.
Noting that assessing the scale of issue and distribution will help identify “the appropriate underlying technology best suited to handle such transactions,” the apex bank detailed:
Given its dynamic impact on macroeconomic policy-making, it is necessary to first adopt basic models and test them exhaustively so that they have minimal impact on monetary policy and the economy. banking system.
Discussing the role of a central bank digital currency in cross-border transactions, the RBI said that “the introduction of the CBDC has the potential to improve the efficiency of cross-border payments and may offer an alternative for correspondent banks to the future “. The report states:
India’s advancements in payment systems will provide a useful backbone in making a cutting-edge CBDC available to its citizens and financial institutions.
Meanwhile, RBI Governor Shaktikanta Das has repeatedly stated that the central bank has serious and overriding concerns about the cryptocurrency. At its recent central board meeting, the RBI called on the Indian government to impose a total cryptocurrency ban, saying a partial ban would not work. Nonetheless, the government reportedly intends to regulate crypto assets with the Securities and Exchange Board of India (SEBI) as the primary regulator.
What do you think of the RBI’s comments on CBDC? Let us know in the comments section below.
Image credits: Shutterstock, Pixabay, Wiki Commons
Warning: This article is for informational purposes only. This is not a direct offer or the solicitation of an offer to buy or sell, nor a recommendation or endorsement of any product, service or business. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or allegedly caused by or in connection with the use of or reliance on any content, good or service mentioned in this article.