The Reserve Bank of India is working on a phased rollout of a Central Bank Digital Currency (CBDC) in a bid to lower the country’s dependence on cash.
According to RBI’s deputy governor Rabi Sankar, the CBDC will likely coexist with cash and other digital forms of payments. The institution is currently framing several considerations on the scope and legal framework of the proposed CBDC.
Sankar stressed the importance of having a consultation with stakeholders regarding the CBDC rollout.
“CBDC will be in the arsenal of most if not all central banks in the world. Setting this up will require careful calibration and a nuanced approach in implementation. Drawing board considerations and stakeholder consultations are important. However, conducting pilots in wholesale and retail segments may be a possibility in near future,” said Sankar.
Sankar stated that the bank has been exploring the pros and cons of launching a CBDC for a while. He said that after the studies, an evaluation would be made on the general purpose of CBDCs as part of the phased implementation.
Bitcoin does not align with RBI’s definition of currency
He added that cryptocurrencies do not align with the bank’s definition of currency. Notably, the consideration that Bitcoin is not a currency is among the reasons the bank is looking for an alternative.
The CDBC also seeks to solve the volatility concerns regarding cryptocurrencies like Bitcoin. The bank believes that a CBDC lowers the risks since it is not subject to volatility.
The official further acknowledged a Bank of International Settlements (BIS) study indicating that 86% of central banks globally are researching CBDC. He noted that 60% of the regulators are experimenting while 14% are in the pilot testing phase with CBDC.
India now joins other countries with intentions to roll out a CBDC. This comes after the European Central Bank stated that it would begin a 24-month investigation phase on the launch of a digital euro. If the phase is successful, the digital euro will be a reality by 2025.