The Reserve Bank of India is exploring the need for a digital version of its fiat currency. In a recent outlook on payments in the digital era, the bank justified its earlier apprehension, but revealed that it’s now open to the possibility of a digital rupee.
The RBI has come to be seen as one of the greatest impediments to digital currency adoption in India. It has previously banned commercial banks from processing digital currency-related payments. This decision was overturned in March 2020 by the Supreme Court, however.
In a new report, the regulator has now revealed it’s warming up to the possibility of a central bank digital currency. The report stated that digital currencies have gained great popularity in India. Regulators in India have taken a keen interest, while at the same time being skeptical about the associated risks. It added:
“Nevertheless, RBI is exploring the possibility as to whether there is a need for a digital version of fiat currency and in case there is, then how to operationalise it.”
The report is just the latest suggestion that the bank has left the door open when it comes to a CBDC. A year ago, the country’s National Institute for Smart Government (NISG) published a draft National Strategy on Blockchain advocating for a digital rupee. It recommended a permissioned blockchain rollout for the CBDC.
The Institute, which consults for state and the national governments, believes that a digital rupee would allow Indians to monetize their data.
“Unlocking the value of the data in the hands of citizens in a secure manner could give a big boost to citizens’ disposable incomes,” the Institute stated.
Two years ago, the RBI created an inter-departmental group to explore the feasibility of a CBDC. It cited the emergence of private digital tokens and the rising cost of minting fiat currency as key reasons for the CBDC. The RBI never made the findings of the group public. It, however, shelved its digital rupee plans in 2019.
“The government doesn’t want the digital currency any more. It thinks it is too early to even think about a digital currency,” a source told a local outlet.
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