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Mumbai: The Reserve Bank of India (RBI) is considering a phased introduction of its own central bank digital currency (CBDC), deputy governor T. Rabi Shankar said, and is examining various issues including the underlying technology and issuance method.
“CBDCs are likely to be in the arsenal of every central bank going forward. Setting this up will require careful calibration and a nuanced approach in implementation,” Shankar said according to a speech released late on Thursday.
“As is said, every idea will have to wait for its time. Perhaps the time for CBDCs is nigh,” he added.
According to a 2021 survey by the Bank for International Settlements, 86% central banks were actively researching the potential for CBDCs, 60% were experimenting with the technology and 14% were deploying pilot projects.
China leads the space and has already started trials of a digital currency in several cities while the U.S. Federal Reserve and Bank of England are looking into it for a future launch.
RBI has been working on the idea of CBDC for years. Virtual currencies (VCs) like bitcoin have gained popularity in India in recent years and unofficial estimates suggest the country has around 15 million investors holding over 100 billion rupees ($1.34 billion) in crypto assets.
The RBI has repeatedly voiced its concern over the spread and use of cryptocurrencies which it sought to outlaw in April 2018. It had to withdraw the ban in March 2020 when the country’s top court said the move was unconstitutional.
“CBDCs are desirable not just for the benefits they create in payments systems, but also might be necessary to protect the general public in an environment of volatile private VCs,” Shankar said with regards to the need for CBDCs for emerging economies.
Sameer Narang, chief economist at Bank of Baroda said investors would still look to private digital currencies, which have appreciated in value despite recent falls.
“Some users may want to use the private digital currencies as store of value and not only for payments,” he added.
On January 25, Mint reported that the central bank is exploring whether there is a need to issue a digital version of the rupee in the country. “Private digital currencies have gained popularity in recent years,” the central bank had said in a booklet on payment systems in India.
According to the report, the RBI booklet suggested that a digital version of the rupee is one of the many ways in which RBI is considering to increase the adoption of digital payment systems in India.
The Central Bank Digital Currencies is a legal tender and a central bank liability in the digital form, the booklet noted. “It is in the form of electronic currency, which can be converted or exchanged at par with similarly denominated cash and traditional central bank deposits,” the booklet said.
(With inputs from Reuters)