The Reserve Bank of India (RBI) informed that they are finalising plans to begin the pilot phase of introducing the central bank digital currency (CBDC), the “digital rupee” and noted that the ‘digital rupee’ would be designed to complement rather than replace the existing digital payments.
On Saturday, the RBI issued a formal statement outlining its architectural decisions and technological considerations for the CBDC pilot phase.
According to the apex central bank, the creation of a digital rupee will assist the Indian economy minimise operating expenses associated with physical cash management, improving the efficiency of payment settlements, and stimulating innovation in cross-border payments. While the digital rupee is identical to banknotes, it will be tailored for speedier and less expensive settlements.
RBI informed that the CBDC could be viewed as a safer substitute of bank deposits. “It is the responsibility of the central bank to provide its citizens with a risk-free CBDC which will provide the users the same experience of dealing in currency in digital form, without any risks associated with private cryptocurrencies.”
The RBI anticipated that with an offline function in the CBDC, people in distant places with restricted internet connectivity will be able to access financial services more readily. The RBI further stated that the CBDC will allow the general public to gain the full benefits of private cryptocurrencies without jeopardising the country’s economy’s financial stability.
However, RBI concluded that the potential impact on monetary policy from the introduction of CBDC is still unclear. The RBI has yet to decide whether to issue the CBDC using a centrally controlled database or distributed ledger technology. It will, however, learn to choose the choice that provides higher levels of cybersecurity, resilience, technical stability, and governance requirements.
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