RBI likely to launch digital currency by December 2021: Report
The Reserve Bank of India (RBI) Governor Shaktikanta Das has said that the central bank is working on launching the first-ever trials for a digital currency for India by December 2021. Speaking to a news channel on Thursday, Das informed that the apex bank has been designing a strategy to ensure phased implementation of the central bank digital currency (CBDC) in the country. He added that the officials are working with caution to develop a digital currency, highlighting that it is a “completely new product, not just for RBI, but globally.”
“I think by the end of the year, we should be able to, we would be in a position, perhaps, to start our first trials,” he said, as quoted by media reports.
Various aspects of digital currency
The RBI is exploring various aspects of the digital currency, including its feasibility for retail and international trade payments, impact on India’s financial and monetary sector, and currency circulation, among other factors.
Last month, RBI Deputy Governor T. Rabi Sankar had said that the central bank is analyzing potential uses of a digital currency with the aim of preventing any form of disruption. He stressed that the CBDC is similar to the currency issued by the central bank, but in a different format than paper. It is proposed to be a legal tender in an online form.
“They are not commodities or claims on commodities as they have no intrinsic value; some claims that they are akin to gold clearly seem opportunistic,” he added.
Notably, digital currency is an electronic form of fiat currency available for the general public. The Central Bank is also pondering on finalizing between a centralized ledger for the digital currency in which the database would be owned and managed by RBI and keeping a digital database with access given to multiple participants under the umbrella term distributed ledger technology (DLT).
Other banks exploring opportunities
RBI Deputy Governor Sankar said that various central banks in other countries like Russia, Japan, and the United Kingdom are exploring the use of digital currencies. They are working on popularizing a more acceptable electronic form of currency to facilitate easy and effective use of physical cash.
“A 2021 BIS survey of central banks found that 86% were actively researching the potential for CBDCs, 60% were experimenting with the technology and 14% were deploying pilot projects,” RBI said in its report.