According to a concept paper that was made public on Friday, the Reserve Bank of India will soon begin limited trial launches of a digital rupee supported by the central bank for specified use cases.
The Reserve Bank of India (RBI) has stated that it has been investigating the benefits and drawbacks of having a central bank digital currency for some time now and is working on a strategy to adopt it in a phased manner.
According to the Reserve Bank of India (RBI), use cases are now being studied for an electronic rupee in such a way that there is minimal or no interruption to the existing financial system.
Back in February, the government of India announced that they would be introducing a digital version of the rupee sometime during the current fiscal year.
As the use of cryptocurrencies grew more widespread in a number of nations, so did the conversation about establishing a digital currency that would be governed by a central bank.
The Reserve Bank of India (RBI) has stated that “it is the responsibility of the central bank to provide its citizens with a risk-free central bank digital money.” This will give users the same experience of dealing in currency in digital form, but without the risks that are associated with private cryptocurrencies.
The bank also gave indications that it may investigate both retail and wholesale uses of digital money, noting that there is merit in both retail and wholesale applications.
According to the Reserve Bank of India (RBI), a wholesale version of digital currency might make settlement systems more effective and secure, while a retail e-rupee would provide citizens with a more secure means of making digital payments.
Since the digital rupee intends to imitate the characteristics of cash, it is unlikely that it will ever pay interest, in contrast to bank deposits. According to the Reserve Bank of India (RBI), this would also give “reasonable privacy for minor value transactions similar to the anonymity associated with physical cash.”
Since tokens are similar to cash, the Reserve Bank of India (RBI) might think about issuing a “token-based” central bank digital currency (CBDC) for retail use, while a CBDC for wholesale use might be “account-based.”
In addition, the Reserve Bank of India (RBI) stated that the electronic rupee might be issued through banks acting as intermediaries. It was underlined that the central bank would continue to be open to various technological options.
According to the concept paper, the conclusions drawn from the pilot projects will be included into the overall layout of the final product.
“A CBDC is intended to complement, rather than replace, existing forms of money and is envisaged to provide an additional payment avenue to users, not to replace the existing payment systems,” the bank said. “A CBDC is also envisioned to provide an additional payment avenue to users, not to replace the existing payment systems.”