Today, Reserve Bank of India Governor Shaktikanta Das told CNBC about its central bank digital currency (CBDC) plans, saying it could be ready for digital rupee testing by the next. end of the year.
However, the bank is keen to act with caution to ensure that it is not possible to clone digital currency and be careful of the impact on monetary policy and the banking system.
But it seems that many typical CBDC decisions still need to be made, and some of them are needed for testing. This includes whether the central bank should issue the digital currency directly or do so through commercial banks.
It has yet to decide whether to start with a wholesale digital currency (only for banks) and move to a mainstream retail CBDC. Or if it should instead start with a retail CBDC in an area located concurrently with a wholesale CBDC.
The central bank has yet to choose whether or not to use blockchain or distributed ledger (DLT) technology or to use a centralized system.
Deputy Governor T Rabi Sankar also spoke on the subject recently. He described some of the main motivations for issuing a CBDC, including the fact that there is still a very high proportion of cash in use in the country which is expensive to administer. It is good that India has advanced payment systems. However, if citizens are drawn to the anonymity of cash, a CBDC might struggle to gain traction.
Another motivating factor is concern over stablecoins and cryptocurrencies. Most stablecoins are denominated in US dollars and the central bank is keen to maintain a “public preference for the rupee”. On cryptocurrencies, the central bank governor said today that he has raised concerns with the government about financial stability. “The government will therefore take the necessary political decisions in this regard,” Governor Das said.
In other CBDC news this month, Jamaica hit their first batch of CBDCs for a pilot. Two US Federal Reserve Governors have spoken of a digital dollar, one supporting the concept and the other questioning the need. And the Bank of Ghana chose German central bank service provider G + D for its CBDC pilot project, the second central bank to do so. The other was Thailand.