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RBI to soon launch CBDC pilot project; blockchain world high on spirits

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New Delhi: The Reserve Bank of India (RBI) on Friday released its concept note for central bank digital currency (CBDC), which was announced by the Finance Minister Nirmal Sitharaman in Parliament during her budget speech in February.

The RBI clarified that the concept note aims to create awareness about CBDC and features of the digital rupee (e₹). It explains the objectives, choices, benefits, risks of CBDCs in India.

It discusses technology and design choices, possible uses of Digital Rupee, issuance mechanisms and examines the implications of introduction of CBDC on the banking system, monetary policy, financial stability, and privacy issues.

The RBI will soon commence pilot launches of CBDC for specific use cases. As the extent and scope of such pilot launches expand, RBI will continue to communicate about the specific features and benefits of CBDC, from time to time.

The digital rupee or CBDC of India will be legal tender issued by the RBI and will be treated as equivalent to sovereign currency and is exchangeable one-to-one at par with the fiat currency.

It will be in alignment with RBI monetary policy and will appear as a liability in the central lender’s balance sheet. CBDC is a fungible legal tender for which holders need not have a bank account.

CBDC will be a medium of payment, a legal tender and a safe store value for all citizens, businesses, governments and others, which can get it converted in the bank money or cash. CBDC aims to speed up the transactions and reduce the cost.

RBI also expressed concern about the popularity of cryptocurrency in recent years. The proliferation of crypto assets can pose significant risks related to money laundering and financing of terrorism, the central bank fears.

“The unabated use of crypto assets can be a threat to the monetary policy objectives as it may lead to the creation of a parallel economy and will likely undermine the monetary policy transmission and stability of the domestic currency,” it said.

Developing CBDC could provide the public with a risk-free virtual currency that will provide them with legitimate benefits without the risks of dealing in private virtual currencies, the RBI said. However, the morale of blockchain and crypto players remains high.

Pratik Gauri, Co-founder & CEO, 5ire lauded the step towards India’s digital currency and appreciated the government’s commitment to financial inclusion. RBI should aspire to build a transparent and robust digital infrastructure.”

A centralized system purposefully skirts innovation and development of a transparent and accountable system, he added. “Blockchain and decentralization are necessary for the success of CBDC.”

Market participants believe that digital money is a great addition as a payment solution for the users and enterprises, opening the door to a plethora of payment options that help businesses run smoothly.

Dileep Seinberg, Founder & CEO, MuffinPay this is one of the most significant events in the Indian Fintech industry, which would facilitate the development of enterprise-level use cases.

“It will also pique the interest of major investors in the Indian blockchain ecosystem,” he added. “CBDC-driven use cases and products will be accessible to mainstream technology companies. In a 24×7 economy, digital Rupee will be a game changer.”

Crypto exchanges are hopeful that the introduction of digital currency will lead to a robust and sound regulatory framework for the digital ecosystem in India, even for the private cryptos.

Shivam Thakral, CEO, BuyUcoin said that digital version of money will make transactions cheaper, secure and easy along with far reaching effects of financial inclusion and easy implementation of government fiscal policies.

“As an industry we welcome the upcoming digital rupee pilot by RBI and look forward to upcoming crypto regulations,” he adds.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)



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