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In a recently released booklet titled “Payment and Settlement Systems in India: Journey in the Second Decade of the Millennium,” by the Reserve Bank of India (RBI), the apex bank revealed it’s considering the possibility of launching a central bank digital currency.
Like most individuals and institutions who were once skeptical about joining but are now in the crypto community, the Indian regulators still doubt the digital currency system. They are hesitant about adopting the approach owning to the risks peculiar to digital currencies.
This doubt about digital currencies is one reason why the RBI banned banking services to crypto companies in 2018, which affected many crypto businesses until the country’s Supreme court overturned the de facto ban last year.
Having noticed the measure of popularity that cryptocurrencies have attracted in the past years, the central bank said in the booklet that it is “exploring the possibility as to whether there is a need for a digital version of fiat currency and in case there is, then how to operationalize it.”
This RBI decision to research and consider launching a digital currency is not a first as the central bank had created an inter-departmental group in 2018. This group explored the “desirability and feasibility” of introducing a digital version of the country’s currency to minimize banknotes’ printing costs and other advantages of a digital currency.
However, in December 2019, the governor of RBI, Shaktikanta Das, mentioned that due to technological shortcomings, it would be “too early” to launch the Central Bank Digital Currency [CBDC] as an alternative to fiat currency. But he continued, “As and when the technology evolves with adequate safeguards, I think it is an area where the Reserve Bank will certainly look at seriously at an appropriate time.”
As to the requirements necessary for setting up the digital payment system, the RBI said, “To measure the adoption of digital payments, it is essential to have geographical locations of the payment system touchpoints, including bank branches, ATMs, PoS terminals, BCs, etc., across the country. The Reserve Bank has already established a framework to capture these details.”
While India is now exploring the possibility of launching a digital version of its currency, China is way ahead with series of trials on its digital currency and is about to launch it after researching and developing it for years.