RBI publishes concept note of its digital currency

10 Oct 2022 , 09:16 AM

The concept note for central bank digital currency (CBDC), which was first introduced by Finance Minister Nirmal Sitharaman in Parliament during her budget statement in February, was published by the Reserve Bank of India (RBI) on Friday.

The RBI made it clear that the purpose of the concept note is to raise knowledge about CBDC and the characteristics of the digital rupee. It covers the goals, options, advantages, and hazards of CBDCs in India.

It covers design and technological decisions, potential applications for the Digital Rupee, issuance methods, and the effects of the CBDC’s adoption on the banking system, monetary policy, financial stability, and privacy concerns.

In the near future, the RBI will start CBDC trial launches for certain use cases. RBI will occasionally continue to discuss the specific characteristics and advantages of CBDC in its communications as the breadth and depth of such pilot launches increase.

The RBI will issue the digital rupee, also known as the CBDC, as legal tender, and it will be exchangeable for equal value with fiat money.

It will be consistent with RBI monetary policy and show up on the central lender’s balance sheet as a liability. CBDC is fungible legal money for which account ownership is not required.

For all individuals, companies, governments, and other entities that can convert it into bank money or cash, CBDC will serve as a means of exchange, a kind of legal tender, and a reliable store of value. CBDC wants to make transactions faster and cheaper.

The rise in popularity of cryptocurrencies in recent years has alarmed RBI as well. The proliferation of cryptocurrency assets, according to the central bank, poses serious dangers for money laundering and terrorism financing.

According to the RBI, creating CBDC may offer the general public a risk-free virtual currency that would offer them legal benefits without the hazards associated with transacting in private virtual currencies. The sentiment among blockchain and cryptocurrency players is still positive.

According to news reports, market participants think that digital money is a terrific complement to the payment options available to consumers and businesses, providing a wide range of payment methods that support efficient business operations.

Crypto exchanges are optimistic that the use of digital money would result in a strong and sound regulatory framework for India’s digital ecosystem, including private cryptocurrencies.

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