RBI to launch India CBDC
The Reserve Bank of India is about to launch India CBDC, or Central Bank Digital Currency, aimed at specific use cases.
According to the Reserve Bank of India (RBI), "multiple technological options will be tested, and the final architecture will be decided based on the results." The Indian Central Bank recently published a report titled "Concept Note on Central Bank Digital Currency."
The RBI clarified that the concept note's goal is to raise awareness about CBDC and the characteristics of the digital rupee. It explains the objectives, options, benefits, and risks of CBDC in India.
It discusses technology and design choices, potential uses of the digital rupee, issuance mechanisms, and the effects of CBDC implementation on the banking system, monetary policy, financial stability, and privacy concerns.
CBDC will be a payment medium, legal tender, and safe store of value for all citizens, businesses, governments, and others who can convert cash into digital rupees. It aims to speed up transactions while lowering costs.
It will be consistent with RBI monetary policy and appear on the central bank's balance sheet as a liability. It is a fungible legal tender that does not require holders to have a bank account.
Digital currency will be introduced gradually, with appropriate phase-out strategies. This means that the launch will proceed through various stages of pilots, followed by a final launch.
In addition, there will be concurrent use cases that can be implemented with little to no disruption.
RBI on CBDC
The Reserve Bank of India has also been analysing the idea of "implementing account-based CBDC in the wholesale segment and token-based in the retail segment via a graded approach."
The RBI has also expressed concern about the recent rise in the popularity of cryptocurrency. It is concerned that the proliferation of crypto assets will pose significant risks in terms of money laundering and terrorism financing.
"The unabated use of crypto assets may pose a threat to monetary policy objectives because it may result in the creation of a parallel economy and will likely undermine monetary policy transmission and domestic currency stability," it said.
The RBI stated that developing the CBDC could provide the public with a risk-free digital currency that will provide them with lawful benefits without the risks associated with dealing in private virtual currencies.
Author: Priya Kumari
Priya is a passionate content writer and the co-founder of Finendorse. She is an enthusiastic crypto investor and has a huge interest in the upcoming digitisation age.