The Reserve Bank of India’s (RBI) latest move to roll-out pilot program on Central Bank Digital Currency (CBDC), has two sides. While many expects this move to positively impact the financial sector, a few also are wary of its downwards implications. “A CBDC issued by the RBI would boost financial inclusion by allowing individuals without bank accounts to access the formal financial system. At the same time, a well-orchestrated systemwide cyberattack on CBDC infrastructure could throw the economy out of gear and potentially lead to a significant loss in economic output as CBDC adoption rises,” Swarup Gupta, head and finance lead, the economic intelligence unit (EIU) told FE Blockchain.
As per a recent report by Bank for International Settlements (BIS) cryptocurrencies are speculative assets rather than money. Add to that the RBI noted it its study that the unabated use of crypto assets can be a threat to the monetary policy objectives as it may lead to the creation of a parallel economy. “CBDC will have privacy issues as users have to verify their identity with the central bank. But from a regulatory standpoint, it addresses the concerns of security, anti-money laundering (AML), among others,” Srinivas L, CEO, Rooba Finance, a crypto and digital asset management ecosystem noted.
Meanwhile, in an official communique, the RBI stated that developing CBDC might provide the public with a risk-free virtual currency which will provide them with legitimate benefits without hazards associated with trading in private virtual currencies. “In long run, CBDC will hopefully reduce the dependence on the US dollar as a reserve currency, especially as other countries launch their own CBDCs and if a proposed Brazil, Russia, India, China and South Africa (BRICS) digital currency is launched,”Gupta added.
Moreover, industry experts opined that a CBDC version of the Rupee is likely to create a level playing field for smaller fintech companies as it will aid in reduction of entry barrier. “CBDC will serve as a means of exchange, a kind of legal tender, and a reliable store of value. The digital-rupee will make the transactions cheaper as well as secure,” Shubham Gupta, chief product officer, STAN, stated.
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