India is set to have its own digital rupee which will be powered by blockchain technology, says the country’s Finance Minister Nirmala Sitharaman. The announcement comes in the backdrop of speculations that the Indian government is working towards banning cryptocurrencies in the country. However, the government has not listed the Cryptocurrency Bill in its tentative list of 15 proposed legislation.
The Reserve Bank of India in 2021 had recommended an amendment to the RBI Act, 1934 to include currency in digital form in the definition of banknote. Pankaj Chaudhry, the Minister of State in the Ministry of Finance, said the central bank is working on a phased implementation strategy for the introduction of CBDC. The government of India recognizes the potential of CBDC to provide significant benefits, including less dependency on cash and reduced settlement risk.
Chaudhry says CBDC could lead to a more robust, efficient, trusted, regulated and legal tender-based payments option in India. But there are risks as well. And it needs to be carefully evaluated against the benefits. Over the years, the RBI has been a staunch critic of cryptocurrencies, especially bitcoin. It has highlighted the potential financial, operational, legal and security risks associated with it. Moreover, the central bank has always kept the customers’ security and protection at heart.
Monish Shah, a partner at Deloitte India, says India’s CBDC is likely to play a catalyst in creating a future of value transfer platforms. It will contribute to a more resilient, innovative and competitive payment system for businesses, households and the Indian economy.
Furthermore, the digital rupee is expected to usher in innovation around securities settlement for capital markets, atomic transactions and programmable payments around DBT.