India explores central bank-backed digital currency
The Reserve Bank of India (RBI) confirmed it is the latest of the world’s central banks to explore a central bank digital currency (CBDC) that would constitute the digital equivalent of the country’s currency – in this case the Indian rupee (INR).
In its annual report issued earlier this week, the RBI reported that it has set up an inter-departmental group to explore the demand and plausibility of a blockchain-based digital currency to be used in domestic payments.
Last September, RBI executive director Sudarshan Sen indicated that the bank was exploring the concept of a fiat cryptocurrency, with the digital token dubbed ‘Lakshmi Coin’ after the Hindu goddess of wealth and prosperity.
India’s central bank and monetary regulator cited “rapid changes” in the global payments industry triggered by disruptive factors like the “emergence of private digital tokens and the rising costs of managing fiat paper/metallic money” as factors that had persuaded the RBI to explore its own digital asset.
The RBI did not reveal whether the potential CBDC may be blockchain-powered, but noted that employing distributed ledger technology (DLT) in payment and settlement solutions “holds the promise of significant economic benefits in future.”
In contrast to its support for adoption of DLT at a state level, the RBI again toughened its stance on crypto trading in the report, shifting its focus to transactions between individuals following its ban on bank accounts for exchanges announced in April
According to reports, the RBI discreetly set up the new internal unit more than a month ago with a mandate to research cryptocurrency and blockchain technology under its roof. The new unit will also consider drafting regulations for the usage and trading of public, decentralised cryptocurrencies such as bitcoin.
A news report on Thursday in the Economic Times stated that the RBI is interested in the savings that would result from no longer printing paper notes, a cost which this year is estimated at nearly $90m.