The RBI has stated that it is working on a phased digital currency implementation strategy and is researching cases where it can be used with minimal disruption. Cases are being investigated by the RBI. The CBDC has argued forcefully that the RBI would lower government currency costs and assist in combating the threat of virtual currencies. The CBDC was a compelling case for the CBDC in India.
“The creation of our own CBDC could provide uses that no private virtual currency can provide, while still retaining public rupee preference.” It may also protect the public from the unusual level of volatility experienced by some of these virtual currencies,” said RBI Deputy Governor T Rabi Sankar during a webinar on Thursday.
Sankar also stated that CBDC pilots for the wholesale and retail sectors would be possible in the near future. “As the saying goes, each idea must wait its turn.” “Perhaps it’s time for CBDCs,” he speculated.
The need for banks to maintain deposits may be reduced for digital currencies
According to Sankar, while the need for banks to maintain deposits may be reduced for digital currencies, the impact is limited because they cannot pay interest. “Because of the potential costs of disintermediation, developing and implementing the CBDC in such a way as to manage CBDC demand relative to bank deposits is critical,” says Sankar.
The RBI is looking into whether they should be used for retail or wholesale payments, distribution or centralization of ledger documents, token-based or account-based payment, direct issuance by the RBI or banks, and the degree to which they should be anonymized.
When it comes to virtual currencies, Sankar stated, “Private virtual currencies are diametrically opposed to the history of money” (cryptocurrencies). They are neither commodities nor commodity claims because they have no intrinsic value, and comparing them to gold appears clearly opportunistic.
They do not, according to the most popular, represent any individual’s debt or obligations. Nobody is the one who makes the decision. Nobody. It’s not money.”
According to the Vice-Governor, 86 percent of central banks are investigating the potential of virtual currencies, 60 percent are experimenting with technology, and 14 percent are launching projects. Pilot projects are already in the works. He stated that there has been an increase in interest in replacing paper and that the more harmful consequences of private currencies have been avoided.
The Deputy Governor’s remarks come as the RBI was forced to lift a ban on cryptocurrencies by a Supreme Court order. Although the RBI has previously discussed plans to launch a digital currency, this is the first time the central bank has been so specific.
To compete with cryptocurrencies, central banks around the world are planning to launch their own digital currency. China has tested its e-CNY in 70 million transactions.