The Reserve Bank of India is working towards bringing a central digital currency through a ‘phased implementation strategy ‘. The announcement was made on Thursday by RBI’s Deputy Governor T Rabi Sankar in a keynote address delivered at a webinar organised by the Vidhi Centre for Legal Policy, New Delhi. The digital currency will be launched as a pilot project in wholesale and retail segments.
Speaking at the webinar on the topic ‘Central Bank Digital Currency – Is This the Future of Money’, Sankar said that many central banks around the world were working on the introduction of Central Bank Digital Currencies (CBDCs) and that the RBI was also evaluating the pros and the cons of the same. He highlighted the importance of sovereign backed virtual currency calling it necessary to protect consumers from the volatility witnessed in non backed digital currencies.
The Deputy Governor said that amendments would be required to the Coinage Act, Foreign Exchange Management Act and Information Technology Act as these laws had been made with respect to physical currencies. The central bank is considering launching a general purpose CBDC and is looking for ways that would ensure minimum disruptions to the country’s banking and monetary systems.
On risks arising from such digital currencies, Sankar said, “There are associated risks, no doubt, but they need to be carefully evaluated against the potential benefits. ” He added that the central bank would be carefully examining various aspects of CBDCs like their scope, underlying technology and validation mechanism.
A high-level committee formed by the Finance Ministry has also recommended the introduction of CBDCs in the country.