AS the legality of cryptocurrency is vague, the Reserve Bank of India (RBI) is working on bringing out a Central Bank Digital Currency (CBDC). After four years of an inter-ministerial committee’s recommendation to launch fiat money in digital style, the RBI has said that preliminary plans to check its feasibility may be launched soon.
In fact, according to a study by the Bank of International Settlements (BIS), 86 percent of central banks all over the world are examining and researching CBDC and 60 percent are presently experimenting with it, while 14 percent are in the initial testing stage.
In India, RBI Deputy Governor Rabi Sankar reportedly said that the central bank was working towards a phased execution plan for its own digital currency and would introduce it in the wholesale and retail sectors shortly. He also said that central banks have enhanced their care on digital currencies and their launching will help reduce the use of cash in the economy and lessen the harm to the public from the use of private currencies.
He further said that the RBI was scrutinising ways to reduce or remove disruption in India’s banking and fiscal systems. He said that legal modifications would be essential as present provisions had been made keeping in mind currency in the physical shape under the RBI Act. He said significant amendments would be needed in the Coinage Act, Foreign Exchange Management Act and Information Technology Act. Sankar said that crypto-currencies such as Bitcoin do not match the RBI’s definition of “currency”.
This is the main reason why the RBI, together with other central banks all over the world, is considering CBDC as a substitute to the volatile crypto asset in the conventional economy. CBDC curtails damages as it is not subject to market instabilities.
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