There are plans for the Indian central bank to facilitate the test launch of the national cryptocurrency in a pilot program. According to a paper, the Reserve Bank of India proposed a pilot program for its Central Bank Digital Currency. This was in accordance with Friday’s announcement by the agency.
India’s central bank published a “concept Note” that outlined its vision for the digital rupee. It explained the reasons behind implementing a CBDC (central banks digital currency), and how it would work in different phases.
All over the world, central banks are increasingly interested in CBDCs to replace paper money. This includes countries from Australia to the U.S.. The RBI paper mentioned China and 16 other countries who are currently using a CBDC to justify moving forward.
The paper says that “presently, we are at the forefront of a watershed move in the evolution of currency which will decisively alter the very nature and functions of money.” “CBDCs are being viewed as a promising invention, and as the next step towards the evolution of sovereign currency.”
The RBI intends to launch the e-rupee as a pilot program. It will be used as an additional currency alongside paper money. According to the paper, the e-rupee can also be used as an alternative currency to cryptocurrencies.
According to the central bank, unrestricted use of cryptocurrency poses a threat to India’s financial and macroeconomic stability.
This reduces the government’s ability to regulate and determine monetary policy. Further, a CBDC is needed.
The RBI stated that CBDCs would provide virtual currency benefits to the public while protecting consumers from the negative economic and social consequences of private virtual currencies.
Two versions of the CBDC are being considered by the central bank. One version would be for retail payments, and the other would be for settlements between banks and wholesale transactions. According to the RBI, a CBDC would make payments more reliable, trustworthy, and robust.
Although the RBI acknowledged that small transactions could be anonymous, it stated that privacy was a problem.
“The possibility for an anonymous cryptocurrency to facilitate [a] shadow economy and illegal transactions makes [it highly unlikely] that any CBDC would have been designed to fully match [the] levels of anonymity, privacy, and security currently available with physical cash,” said the central bank.
In February 2002, the Indian government announced that it would launch a CBDC. It stated that the technology would provide a significant boost to the economy.
India may feel the effects of China’s CBDC rollout. This has prompted discussion among U.S. legislators about whether the supremacy and dominance of the dollar is at risk.
Federal Reserve Chairman Jerome Powell stated that Congress would receive guidance by the U.S. central banks on issuing a CBDC in June. Since 2017, the Fed has been exploring the possibility of a digital currency.
He said, “I believe it’s something that we really need to investigate as a nation.” It’s an important financial innovation that could impact all Americans.