India plans to implement the country’s digital currency in phases, Reserve Bank of India’s deputy governor Shri T Rabi Sankar said at a webinar organized by the Vidhi Centre for Legal Policy, New Delhi.
Fast facts
- “CBDC (central bank digital currency) will be in the arsenal of most if not all central banks in the world. Setting this up will require careful calibration and a nuanced approach in implementation,” Sankar said. “Drawing board considerations and stakeholder consultations are important. However, conducting pilots in wholesale and retail segments may be a possibility in near future.”
- The central bank is working towards a “phrased implementation strategy” and is still deliberating the basics of the digital currency, including whether it should be retail or wholesale, distributed ledger or centralized ledger, token or account-based, and issued by the central bank or commercial banks.
- The bank also needs to update laws to accommodate the new digital form of legal tender. This includes sections in the RBI Act concerning denomination and forms of banknotes as well as articles in the Coinage Act, Foreign Exchange Management Act and Information Technology act.
- India is still a cash-dominated country. Cash is used predominately for transactions up to 500 Rupee, or US$6.17, more than the average daily wage earned by a regular urban worker.
- Digital currencies can reduce the cost of printing currency as well as reducing settlement risks as no physical cash needs to be handed over during transactions, according to RBI. As the “secure and stable form of digital money,” they could also minimize the risks posed by cryptocurrencies — now investment assets of 7.5 million Indians.
- Central banks around the world have started researching and testing out their respective CBDCs in small or large scale. India is catching up — with patience, as Sankar said at the end of his speech: “[E]very idea will have to wait for its time. Perhaps the time for CBDCs is nigh.”
- India’s government digital currency plans are proceeding as its regulation of private cryptocurrency like Bitcoin appears to have stalled, prolonging a sense of limbo among the nation’s crypto industry.