India Soon Going to Have New Central Bank Digital Currency as RBI Explores Possibility | Details Here

Private digital currencies, virtual currencies and cryptocurrencies are gaining popularity in recent years.

New Delhi: The country is going to have new central bank digital currency, thanks to the Reserve Bank of India (RBI) for exploring the possibilities. Issuing a statement, the RBI said it is examining if there is a need to introduce central bank digital currency (CBDC) in the country and is exploring ways to operationalise it, if necessary.

“Nevertheless, the RBI is exploring the possibility as to whether there is a need for a digital version of fiat currency and in case there is, then how to operationalise it,” the RBI said in a statement.

The statement from RBI comes as a number of private digital currencies, virtual currencies and cryptocurrencies are gaining popularity in recent years. However, the regulators and governments have been sceptical about these currencies and are apprehensive about the associated risks.

What is Central Bank Digital Currency?

According to RBI, the Central Bank Digital Currency or CBDC is a legal tender and a central bank liability in digital form denominated in a sovereign currency and appearing on the central bank’s balance sheet. 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 RBI said that the innovations are changing the payments space rapidly and this has made central banks around the world to examine whether they could leverage on technology and issue fiat money in digital form.

Citing a survey of central banks conducted by the Bank for International Settlements, the RBI had in February said some 80 percent of the 66 responding central banks have started projects to explore the use of CBDC in some form.

“These central banks are contemplating and studying the potential benefits and implications of CBDC in the economy. We discuss below the efforts being made in central banks of China and Sweden in this regard,” the RBI Bulletin had said then.

However, the RBI is now evaluating the possibility of issuing its own cryptocurrency shows the importance of this sector in the future of currency regulations.

Apart from RBI, the central government has been skeptical of privately issued cryptocurrencies. In fact, there is a bill lying with the Parliament requesting for a complete ban on privately held digital currencies. The bill is yet to see the light of the day.