The Reserve Bank of India (RBI) said on Tuesday that, given its dynamic impact on microeconomic policies, India must initially adopt the basic model of a central bank’s digital currency.
The Reserve Bank of India stated in its report “India Banking Trends and Progress in 2020-21” that its basic form is central bank digital currency (CBDC), which provides a safe, robust and convenient alternative to physical cash. “Various design choices, it can also assume the complex form of financial instruments. Compared with the existing forms of currency, it can provide advantages in terms of liquidity, scalability, acceptance, the convenience of anonymous transactions, and faster settlement. Users provide benefits,” the Reserve Bank of India said
The Reserve Bank of India further added that global central banks are now considering how to implement digital currencies, moving forward from their initial exploratory attempts.
In this case, RBI believes that certain key issues related to the central bank’s digital currency design elements need to be resolved before it is introduced, for example, is CBDC universal, can it be used for retail purposes, or can it be used for wholesale purposes.
In addition, in countries like India, the Reserve Bank of India stated that it needs to carefully weigh the decision on the issuance structure, that is, whether digital currencies are issued directly by the central bank or through commercial banks.
“Measuring the scale of the issuance, distribution will also help determine the appropriate basic technology best suited to handle this type of operation.
In view of its dynamic impact on the formulation of macroeconomic policies, it is necessary to initially adopt the basic model and conduct comprehensive tests to minimize its impact on monetary policy and the banking system. “
The Reserve Bank of India stated that India’s advances in payment systems will provide citizens and financial institutions with the most advanced CBDC to provide a useful pillar.
RBI has been studying use cases and developing a phased implementation strategy to introduce CBDC with little or no interruption. Earlier this month, the Central Committee of the Reserve Bank of India discussed various aspects related to CBDC and private cryptocurrencies.
Parliament recently learned that the government had received a proposal from the Reserve Bank of India in October 2021 to amend the Reserve Bank of India Act of 1934 to expand the definition of “bank bill” to include currency in digital form.
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