India has finally started to warm the idea of a digital rupee. Thanks to the digital revolution that has taken the world of payment settlements by storm, the Reserve Bank of India [RBI] said that it is exploring if there is a need to issue a digital version of the rupee in the country.
Enter Digital Rupee
The apex bank of India asserted that it would work on a way to operationalize central bank digital currency [CBDC] if its need arises. The Reserve Bank of India on the 25th of January released a 142-page Booklet on Payment Systems, wherein it mentioned,
“In India, the regulators and governments have been skeptical about these currencies and are apprehensive about the associated risks. 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 operationalize it.”
Digital Rupee is Not a Cryptocurrency
This was an interesting development considering how India has been rather apprehensive of the entire cryptocurrency industry. A quick primer: Previously in 2018, the RBI had imposed the infamous ban on cryptocurrency transactions that was eventually overturned by the country’s Supreme Court last March.
Even as the lack of clarity surrounding the space has led to chaos in the country, cryptocurrency adoption continues to soar especially after the SC’s decision.
However, CBDCs are traditional money, but in digital form; that is issued and governed by a country’s central bank. Hence, this development, in no way, depicts how friendly the laws will become with respect to cryptocurrencies as Digital Rupee makes an entry.
Over the past several years, there have been rapid innovations across the payments sector. This, in turn, has triggered central banks around the world to examine digital routes.
China, for instance, has been at the forefront of CBDC development. In a bid to encourage the usage of CBDCs several cities in the country are all set to planning to go through pilot testing of the digital yuan this year. Among many, Beijing, Shanghai are the major cities that is planning to join the testing to promote the digital currency before its launch in the near future.