Reserve Bank of India to Begin CBDC Trial
- The Reserve Bank of India joins other financial regulators in launching its own CBDC.
- CBDCs have more legal recognition in a country than cryptocurrencies.
The Reserve Bank of India is set to begin a CBDC trial with fintech companies and public sector banks. An unnamed public sector bank official informed a local source that the trial might come before the RBI launches a CBDC this fiscal year.
The RBI is also in talks with a U.S.-based financial firm, FSI, alongside other local companies. A senior director in the company, Julia Demidova, confirmed that several discussions had taken place and FSI was open to the RBI’s experiment with the CBDC. FSI is already an active player in the CBDC market. The firm recently launched its Virtual CBDC lab.
Many government-owned banks, including the State Bank of India, Punjab National Bank, Union Bank of India, and Bank of Baroda, are allegedly in discussions with the RBI about participating in the experiment. The Reserve Bank of India intends to implement the CBDC in phases. According to the financial body, the Indian CBDC will be implemented in three stages between 2022 and 2023.
India has shown great interest in launching its own digital payment system, and this CBDC trial mirrors the country’s ambitions. Nirmala Sitharaman, the Indian finance minister, has praised the impact of a CBDC on the nation’s economic development.
Although crypto trading is not banned in India, the RBI has long harbored serious doubts about it, and taxes imposed this year have had a negative impact on the sector. Indian authorities believe the CBDC would compete with private cryptocurrencies and boost the nation’s economy.
In an interview with CNBC, the RBI governor, haktikanta Das, noted that the RBI is researching various digital currency features, including its security, impact on India’s financial industry, and effects on monetary policy and cash in circulation. Das said,
We are being extremely careful about it because it’s completely a new product, not just for RBI, but globally.
The Growing Awareness of CBDCs
Central banks, including those in China, Europe, and the United Kingdom, are investigating the possibility of issuing digital currencies to either commercial lenders or the general public. CBDCs are known as central bank digital currencies because they are essentially the digital equivalents of the corresponding fiat currencies. CBDCs are legal tender in digital form.
CBDCs are different from cryptocurrencies in so many ways. To start, they would be completely regulated and overseen by a single body, usually the central bank. Furthermore, central bank digital currencies would function more like their fiat counterparts and enjoy broad acceptability rather than being a tradable asset with constantly shifting prices.
Following a drop in the use of cash and a surge in interest in cryptocurrencies like bitcoin, central banks have increased their efforts to investigate digital currencies over the past year. As of this writing, China is leading the way in terms of launching its own CBDC. The Asian giant already has real-world trials in different cities.
Lawrence has covered some exciting stories in his career as a journalist, he finds blockchain-related stories very intriguing. He believes Web3 will change the world and wants everyone to be a part of it.
