NEW DELHI: The Reserve Bank of India (RBI), like other central banks, has been exploring the pros and cons of introducing a digital currency for quite some time and it is now in the process of launching it in wholesale and retail segments, said Deputy Governor T Rabi Sankar.
While the introduction of the central bank digital currency (CBDC) has the potential to provide significant benefits, there are risks as well such as the underlying technology, the degree of anonymity and changes in legislation. Sankar said these risks are being evaluated against the potential benefits.
“RBI is currently working towards a phased implementation strategy and examining cases which could be implemented with little or no disruption. Setting this up will require careful calibration and a nuanced approach in implementation. That said, perhaps the time for CBDCs is nigh,” said Sankar in his keynote address at a webinar organised by the Vidhi Centre for Legal Policy, New Delhi.
A CBDC is a legal tender issued by a central bank in a digital form. CBDC is a digital or virtual currency but it is not comparable to the private virtual currencies that have mushroomed over the last decade. Sankar noted that the introduction of CBDC has the potential to provide significant benefits, such as reduced dependency on cash in a country like India, where the currency-to-GDP ratio is high, higher seigniorage due to lower transaction costs and reduced settlement risk.