When asked how soon India could have its CBDC, P Vasudevan, chief general manager of RBI’s payments and settlements department, said: “I think it was said somewhere that ‘at least by the first quarter of next year, a pilot project could be launched. “” We are at work and we are looking at the different nuances related to CBDC. It is not a simple thing to just say that CBDC can be a habit of tomorrow … We have to be very careful and see if it should be as whether wholesale segment or target the retail segment, and for what purpose also, ”Vasudevan said.
He added that the central bank would need to determine how a CBDC’s validation mechanism would be implemented, as it would be token-based.
“The banking system has taken the lead in terms of currency distribution as a tiered model… if the same model can be accepted for the CBDC as well, we will have to see,” he said.
Vasudevan said the RBI is also checking whether middlemen can be completely bypassed and whether the technology is decentralized or semi-centralized. While work is underway to secure the upcoming launch of the CBDC, the central bank is still deliberating on the fine print. “We are optimistic about this,” Vasudevan added, saying banks would be involved in the CBDC pilot project when it was launched.
A CBDC is legal tender issued by a central bank, but in digital form. It is the same as fiat money and is exchangeable one by one with fiat money. Only its shape is different.
“It’s also important to understand what a CBDC is not. The CBDC is a digital or virtual currency, but it cannot be compared to the private virtual currencies that have mushroomed over the past decade. Private virtual currencies run counter to the historical concept of money. They are not commodities or claims on commodities because they have no intrinsic value; some claims that they are related to gold seem clearly opportunistic. Usually, certainly for the more popular nowadays, they don’t represent anyone’s debt or liabilities. There is no TRANSMITTER. It is not money (certainly not CURRENCY) as the word has come to be understood historically, ”RBI Deputy Governor T Rabi Sankar remarked on this subject earlier in July during ‘a conference at the Vidhi Center for Legal Policy.
The other panelist agrees. “Nine out of ten central banks are issuing CDBCs, and this could be a good way for India to play in this space… It can be a catalyst for financial inclusion. This can be an opportunity to see how you reduce the cost of cash, ”said Joydeep Sengupta, senior partner at McKinsey & Company.
On private digital currencies, other speakers at the roundtable were divided. While HDFC Bank Country Head for Payments, Technology and Digital Banking Parag Rao called cryptos a “fad” that saw values rise “based, for example, on comments from superstars from the company, ”SBI’s managing director for international banking, technology and affiliates – Ashwini Kumar Tewari said a“ more nuanced view ”should be taken, instead of banning cryptos altogether.
“He can no longer be ignored. The value of crypto today is around $ 3 trillion and is increasing as we speak, ”added McKinsey’s Joydeep Sengupta.
“This is a speculative investment or asset class. Because everyone thinks the next crypto might be Bitcoin and it might be worth $ 50,000 and it becomes like a penny stock, ”said Deepak Sharma, Chief Digital Officer at Kotak Mahindra Bank. “How would the end use of digital currencies be? Its purpose, storage, movement will continue to be a big question, I don’t have an answer to that.
“I think a more in-depth conversation needs to take place, not only in committees but also in the public domain. So the concerns that exist that have been expressed over time – that control over cryptocurrencies or even the money itself might be lost, money laundering issues, all of these concerns are concerns. valid. Does this mean that we are totally banning crypto? I think there may be a nuanced view here. Control is essential, ”said Ashwini Tewari, Managing Director of the SBI.
(Edited by : Aditi Gautam)
First publication: STI