RBI’s model on India’s digital currency could be released by end of 2021
The Reserve Bank of India (RBI) said on Friday that it could release a central bank digital currency (CBDC) model as soon as the end of this year.
Speaking at the post-monetary policy press conference, Deputy Governor T Rabi Sankar said: “We internally assess issues such as scope, technology, distribution mechanism and validation mechanism , etc. “
“These are extremely complex technological and commercial choices that must be made. So it will be difficult to fix a date on it (central bank digital currency) but we should be able to release a model in the near future, probably by the end of this year, “he said.
Previously, the deputy governor said the RBI would gradually introduce its own version of CBDC after carefully assessing its impact on various issues, including how it might hamper banks’ deposit mobilization capabilities and its potential effect on conduct. monetary policy. However, he had mentioned that conducting pilot projects in the wholesale and retail segments could be a possibility in the near future.
Many central banks in large economies are also exploring the possibility of introducing a central bank digital currency. A CBDC is essentially a virtual currency, but it is issued by the central bank and enjoys sovereign support, unlike other virtual currencies.
The issue of the CBDC has crept in in recent years with the advent of private virtual currencies, such as bitcoins. Although these private currencies have their own advantages, they are not backed by any government and therefore do not follow any appropriate jurisdiction. The widespread adoption of these currencies threatens to upset the established model of fiat currencies issued by countries within a border.
In an interview with Business Standard, RBI Governor Shaktikanta Das said the CBDC has implications for monetary and global economies.
In his speech last month, Sankar said that if virtual currencies are recognized, “national currencies with limited convertibility are likely to be at risk.”
As the RBI works to release a CBDC, it has serious concerns about private virtual currencies. The RBI has made its stance on cryptocurrencies clear, saying it has major concerns about these assets, reiterating its long-standing stance on the use of virtual currencies. On Friday again, the governor of the RBI reiterated the position of central banks on these assets. He said the RBI communicated its position on these assets to the government.
The central bank, in its circular of April 6, 2018, had prohibited banks from dealing in cryptocurrencies or offering any service to customers on them. The circular was challenged in the Supreme Court, which overturned the rules on March 4, 2020.