Even though RBI (Reserve Bank of India) banned the use of virtual currencies including Bitcoins by the entities falling under its regulation, it’s open to an introduction of fiat digital currencies which will be issued by it. An interdepartmental group has been formed in order to study and provide guidance on the ‘desirability and feasibility’ to launch a ‘central bank digital currency’ and will submit its report by June, PTI reported citing central bank. Various central banks all across the world are debating on the likelihood of introducing a fiat digital currency which will be issued by them. They constitute liability of the central bank, and they will be in circulation in addition to the paper currency that we have,” Deputy Governor B P Kanungo told reporters on the sidelines of monetary policy review on Thursday. A central digital currency will help it to cut down on the costs of printing and circulating paper currency, PTI reported citing him.
Although critical about Bitcoin and other cryptocurrencies, RBI holds a very supportive view on blockchain technology. There is a need to work on blockchain technology and exploit it further, he said. The distributed ledger technology that forms the backbone of all the digital currencies such as Bitcoin holds an immense relevance for the wider economy and there is a need for us to embrace it, he said further.
“We recognise that blockchain technology or the distributed ledger technology that lies beneath the virtual currencies has a potential benefit for financial inclusion and enhancing the efficiency of the financial system,” he said. In the past too, RBI has issued repeated warnings against making investments in the digital currencies due to their unpredictable nature. Recently, HDFC and Citibank banned the use of their credit or debit cards to make investments in the digital currencies.