The Reserve Bank of India or RBI, is taking the steps to introduce its very own CBDC or Central bank digital currency. They are doing it in a precisely phased manner and investigate its issuance in the country. The deputy governor of RBU, T Rabi Sankar, stated in a speech that was organized by the Center that private digital currencies may become part of the CBDC’s ultimate needs.
Rabi Sankar believes that the development of such a CBDC of RBI can provide the Indian public with the same uses as other digital currencies like Bitcoin while limiting the volatility of normal users. He said, “Indeed, this could be the key factor nudging central banks from considering CBDCs as a secure and stable form of digital money…. The case for CBDC for emerging economies is thus clear – CBDCs are desirable not just for the benefits they create in payments systems, but also might be necessary to protect the general public in an environment of volatile private VCs.”
Sankar Further Said
Sankar went on and further said that the Reserve Bank of India is currently reviewing the phased implementation strategy. It is currently focusing on the situation where CBDC can be implemented with little or no change in the status quo of the bank. Since this idea came, the bank is busy exploring the pros and cons of the introduction of CBDCs.
There are a number of problems in front of them that need to be discussed. They need to be discussed before CBDC can actually be implemented. The bank will also pay attention to the lessons that it can learn from other countries. It is focusing on the countries that are at a time in various stages of introducing a digital fiat currency. He pointed out that careful consideration should be given to how to organize retail payments or payments between consumers and businesses. Security issues were also discussed, including the level of anonymity granted to users.
Among all the problems that were discussed, the deputy governor was majorly concerned with just one. It is the overthrow of the powers of regulators and central banks. He emphasized that if individual users can conduct unsecured transactions on their own, traditional financial institutions may lose their role as a trusted third party. We can say that this is quite a valid fear. This is because Satoshi Nakamoto, the creator of Bitcoin has publicly developed blockchain technology. This was done to break the dominance of unnecessary disintermediation of banks. Also according to him, people conducting business without an intermediary would limit the bank’s ability to provide loans to customers. However, in this statement, he failed to acknowledge the many decentralized lending programs proposed by the DeFi community. Some of which even have already been implemented in the market successfully.
So, Now What?
Sankar stated that still there is a lot of research that needs to be done. However, it won’t take a long time for the bank to put in motion the pilot projects in both wholesale and retail markets. He said, “Setting this up will require careful calibration and a nuanced approach in implementation. Drawing board considerations and stakeholder consultations are important. Technological challenges have their importance as well. As is said, every idea will have to wait for its time. Perhaps the time for CBDCs is nigh.”
CBDC has become more and more popular in the past year. Recently, South Korea selected a blockchain subsidiary of a local Internet company. It acts as a technology provider to guide its digital won. Moreover, Bank of Canada employees also published a study and described the potential benefits of CBDC in detail. According to the report, there are a lot of pros of CBDC. It includes the cancellation of transaction fees for debit and credit cards. In the United States, the chairman of the Federal Reserve stated that CBDC can reduce the number of cryptocurrencies that are currently being launched.