An Indian central bank official says that if there is anything cryptocurrencies like bitcoin and ether can do, the Reserve Bank of India (RBI) should be able to create a product that will do the same work without the associated risks. “That’s basically what we do in CBDC experiments,” he pointed out.
RBI Official on Cryptocurrency vs. Digital Rupee
Reserve Bank of India (RBI) Deputy Governor T. Rabi Sankar spoke about cryptocurrency and Central Bank Digital Currency (CBDC) on Friday at an event organized by the Association of Indian banks (IBA).
“We saw an environment where private currencies were evolving. We realized this posed a threat to investors, systems and the economy. We also realized that private currencies have shown that digitization of currency can eventually benefit,” the RBI official said. “The way to deal with that was to provide a digital currency.”
Referring to non-government issued cryptocurrencies, including bitcoin and ether, as “private” cryptocurrencies, the Deputy Governor said:
If there is anything a private cryptocurrency can do, we should be able to create a product that will do it without the associated risks in a more secure format in government-backed, bank-issued fiat currency. central. This is basically what we do in CBDC experiences.
The RBI launched its first retail central bank digital currency (CBDC) pilot project on December 1 with the participation of eight banks. The pilot will eventually cover 13 cities across India. The retail digital rupee experiment followed that of the RBI wholesale cbdc driver which began November 1 for trading in government bonds. The wholesale pilot will later be expanded to cover more use cases, including money market instruments.
The Indian central banker noted that the first CBDC pilots aim to ensure the efficiency of all systems. He described:
As time goes on, the pilots will focus on identifying the right technology on the right architecture for the distribution of digital currency.
The RBI Deputy Governor explained that the central bank will build on the digital infrastructure it is creating, noting that there are many possibilities including smart contracts and token bonds. He concluded :
There are potentially revolutionary choices, especially in the area of cross-border transactions. There is a huge amount of inefficiency in this process that the CBDC can take care of.
Meanwhile, the RBI believes that cryptocurrencies, such as bitcoin and ether, should be completely forbidden. Sankar said in February, “It would be futile to regulate cryptocurrencies,” warning that crypto products “are fundamentally designed to circumvent the established financial system, and on a larger scale the government itself.”
What do you think of RBI Deputy Governor Sankar’s comments? Let us know in the comments section below.
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