A senior central bank officer at the State Bank of India’s Banking and Economic Conclave has said that India’s central bank, the Reserve Bank of India plans to launch the country’s first digital currency in the first quarter of the next fiscal year. Countries that issue such digital currencies under the central bank are often referred to as central bank digital currencies (CBDCs). The CBDCs are virtual or digital currencies and are a digital version of fiat currencies. For India, it is the domestic currency rupee. “I think somewhere it was said that at least by the first quarter of next year a pilot could be launched. So we are bullish on that,” the Business Standard newspaper quoted P. Vasudevan, chief general manager at the Department of Payment & Settlement of the RBI.
There has been no official comment on the timeline the RBI has allocated towards the launch of the CBDC. However, the central bank governor, Shaktikanta Das was reported as saying on August 27 that a soft launch could be expected by December. “We are on the job and we are looking into the various issues and nuances related to CBDC. It’s not a simple thing to just say that CBDC can be a habit from tomorrow on,” said Vasudevan. He further added that a CBDC could have a useful role depending on how it is implemented and that there should be no hurry to launch it.
On November 17, the RBI governor while speaking at a conclave organised by the State Bank of India reported his concern about investing in anonymous cryptocurrencies. He said that they had the potential to destabilise the financial systems. “The technology (blockchain) is more than 10 years old, it did not come yesterday. The technology will grow and can grow without cryptos,” said Governor Das. “The Reserve Bank of India as the central bank of this country which is entrusted with the responsibility of maintaining financial stability, after due internal deliberations says that there are serious concerns over macroeconomic and financial stability. There are deeper issues which need much deeper discussion.”
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As per a report by the Economic Times on November 17, the Government of India does not plan to ban the use of cryptocurrencies; instead they may not be permitted as currency to settle transactions but could be held as an asset like shares, gold or bonds. The report based on a government source has said that the discussions on possible regulation are ongoing, and that the Securities and Exchange Board of India (SEBI) could be designated as the regulator. A final call is yet to be taken.
The Indian central bank is looking to analyse the integration of CBDC and determine which sector the digital currency should target, for example, wholesale or retail, the validation mechanism, and also address the issue of distribution channels. “The central bank is also checking if intermediaries can be bypassed altogether, and most importantly, checking if the technology should be decentralised or should be semi-centralised,” said RBI CGM Vasudevan.