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The Indian cryptocurrency community is actively fighting for regulatory clarity, but the government appears to be more enthusiastic about the development of its digital rupee. The Reserve Bank of India took another significant step forwards today, shedding light on its nascent digital rupee project. As a result, the RBI announced a “phased introduction” of India’s central bank digital currency [CBDC], also known as the Digital Rupee, as per reports.
According to Deputy Governor T Rabi Sankar, the RBI is working towards the phased introduction of the digital rupee after considering its scope and legal framework. Clarifying that the said CBDC will likely co-exist with cash and other digital forms of payments, the official added,
“Every idea has to wait for its time and perhaps, the time for (India’s) CBDC is nigh. We have carefully evaluated the risks and RBI’s endeavor is that as we move forward, India’s CBDC can reiterate its leadership position in payment systems of the world.”
Sankar went on to say that the CBDC will be part of the “arsenal” of most, if not all, central banks around the world. The “calibrated and nuanced approach” will be considered on the drawing board, as well as through stakeholder consultations.
The RBI has spent a significant amount of time studying and comprehending the fundamentals of a CBDC, according to the Deputy Governor. However, before launching a CBDC, changes to Sections 24, 25, and 26 of the RBI Act, as well as provisions of the Coinage Act of 2011, the Foreign Exchange Management Act, and the Information Technology Act, will need to be made.
A phased introduction will be the way to go to avoid disruption to India’s banking and monetary systems, he concluded.
“We have studied specific-purpose CBDCs proposed by different central banks around the world for wholesale and retail segments. The launch of a general-purpose CBDC for population scale is being considered, and RBI is working towards a phased introduction strategy and examining use cases with little or no disruption of India’s banking and monetary systems.”
While Sankar remains positive about the use of a CBDC, he isn’t an admirer of Bitcoin, with the Deputy Governor stating that the world’s largest cryptocurrency did not meet the RBI’s definition of a currency. He mentioned that central banks are experimenting with CBDCs instead, citing this as a risk to a “sovereign economy.”
The RBI’s enthusiasm for CBDCs places it in the global race to develop a digital fiat, but its lack of enthusiasm for Bitcoin and other cryptos may have kept it from realising the technology’s potential. India’s cryptocurrency exchanges and businesses have been putting pressure on the government for an open discussion and clear guidelines, but the country’s official position remains ambiguous.