India is currently leading the world in terms of digital payments innovations. Do we need CBDC in India? One of the yardsticks that RBI may employ to gauge the need of CBDC is the electronic interface receipts and payments. But the pilot project which the RBI has launched may well have to go beyond the financial aspect but also take into consideration certain social aspects. RBI has a ready reckoner in the case of Sweden which has popularised an electronic form of currency of its own and works like fiat money. Many of them have reached the stage where a pilot project has been launched and in some other countries Special Purpose Vehicles (SPVs) have been put in place. CBDC and the world RBI agrees that the CBDC is currently on top of the minds of many central banks of countries across the globe. The idea of private virtual currencies is at odds with the historical concept of money. RBI specifies that a CBDC is a digital or virtual currency but it can’t be compared to private virtual currencies that have emerged over the last few years. Only its form is different,” the keynote address says. It is the same as fiat currency and is exchangeable one-to-one with fiat currency. “A CBDC is legal tender issued by a central bank in a digital form. Many central banks in the world are now closer to having their own digital version of their fiat money. Many of them are now just electronic transfers and documents, which are in fact fit to be CDBC. Except currency notes, all fiat money (currency notes and coins) or representative money (cheques, drafts, securities, and bonds) can be treated as CBDC. It was James Tobin, an American Nobel laureate and economist, who suggested in the 1980s that US Federal Reserve Banks could make available to the public a widely accessible medium of transactions, according to the keynote address delivered by T Rabi Shankar in July this year. What is CBDC? The idea of CBDC is not a new development. Presently, countries that have opened their economies for cryptocurrencies include El Salvador and Cuba. The strategy by RBI also includes a pilot study to test CBDC as a general-purpose digital currency, which will perhaps be the first fiat digital currency in the world. RBI Deputy governor T Rabi Sankar is sure that CBDC will be a positive step in India, which is seeing a surge in cryptocurrency investments. RBI will follow a “phased implementation strategy” to this end. India’s Central Bank, the Reserve Bank of India is progressively moving towards launching its own Central Bank Digital Currency (CBDC).
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