BENGALURU: The Reserve Bank of India (RBI) is close to launching a ‘sovereign’ cryptocurrency to counter the growth of private digital currencies. It will soon begin a pilot launch of digital rupee (e`) or Central Bank Digital Currency (CBDC) for specific use cases.
The central bank will introduce the digital rupee in a phased manner. “Currently, we are at the forefront of a watershed movement in the evolution of currency that will decisively change the very nature of money and its functions,” the RBI said in a statement on Friday.
CBDC is the legal tender issued by a central bank in a digital form, and its introduction is expected to offer a range of benefits, such as reduced dependency on cash, lesser overall currency management cost, and reduced settlement risk.
The Central bank issued a concept note on CBDC to create more awareness about the digital rupee. In the note said the CBDCs will give the public the benefits of virtual currencies while ensuring consumer protection by avoiding the damaging social and economic consequences of private virtual currencies. RBI will issue two types of CBDCs — wholesale and retail.
While retail would be available to all, wholesale CBDC is for the settlement of interbank transfers and related wholesale transactions. A significant feature of the CBDC is that its offline feature will be beneficial in remote areas because of availability and resilience benefits when power or mobile network is unavailable.