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India to pilot test its own digital currency
February 23, 2022
The Reserve Bank of India (RBI) is working towards a “phased implementation strategy ” for a Central Bank Digital Currency (CBDC), according to the deputy governor T Rabi Sankar.
The national bank is inspecting use cases like the scope of CBDCs – regardless of whether they should be used in retail payments or likewise in wholesale payments, the underlying technology whether it should be a circulated record or a unified record, for example, and whether the choice of technology should vary according to the use cases, validation mechanism whether token-based or account-based, distribution architecture whether direct issuance by the RBI or through banks, degree of anonymity.
Conducting a pilot test in wholesale and retail segments might be a possibility in near future, Sankar said during a keynote lecture on Thursday.
A CBDC is a legal tender issued by a central bank in a digital form. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. Just its form different is unique, explained Sankar.
RBI’s Inter-Ministerial Committee constituted by the Ministry of Finance in November 2017, to inspect the policy and legal framework for the regulation of cryptocurrencies had recommended the introduction of CBDCs as a digital form of fiat money in India.
Like other central banks, RBI has also been exploring the pros and cons of the introduction of CBDCs for quite some time.
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