India Should Adopt Basic Model For Central Bank Digital Currency: RBI
The Reserve Bank of India (RBI) has said that the country needs to initially adopt a basic model of central bank digital currency (CBDC) and use payment system architecture as the backbone to create a state-of-the-art system.
In its basic form, CBDCs provide a safe, robust and convenient alternative to physical cash. Depending on the various design choices, it can also assume the complex form of a financial instrument.
“Given its dynamic impact on macroeconomic policy making, it is necessary to initially adopt and extensively test basic models so that they have minimal impact on monetary policy and the banking system. India’s progress in payment systems is a state-of-the-art. -The-of-the-art CBDC available to its citizens and financial institutions,” RBI said in its report on ‘Trends and Progress of Banking in India 2020-21’.
Compared to existing forms of currency, CBDCs can offer users advantages in terms of liquidity, scalability, acceptance, ease of transactions with anonymity and faster settlement, it said, adding that central banks across the world are considering How to implement CBDC. ,
RBI is examining the use cases and working out a phased implementation strategy for the introduction of CBDCs with little or no disruption.
Central banks around the world are considering how to implement a CBDC, moving on from their initial exploratory efforts.
Earlier this month, the central board of RBI discussed various aspects related to CBDCs and private cryptocurrencies.
Parliament was recently informed that the government has received a proposal from RBI in October 2021 to amend the Reserve Bank of India Act 1934 to expand the scope of the definition of ‘bank note’ to include currency in digital form. happened.