The RBI Is Currently Testing Various Technologies and Models for a CBDC
The Governor of the Reserve Bank of India (RBI), Shaktikanta Das, has reiterated that the central bank remains deeply concerned about the potential impact of cryptocurrencies on the country’s macroeconomic and financial stability.
Regulators have warned that widespread adoption of cryptocurrencies could undermine the RBI’s ability to manage financial stability issues.
Since the introduction of a 30% tax on income from cryptocurrencies, Indian authorities have emphasized that taxing crypto does not equate to legalizing or endorsing digital currencies.
Das urged investors to exercise caution when investing in digital assets, noting that cryptocurrencies lack underlying collateral:
“I believe it is my duty to tell investors that when they invest in cryptocurrencies, they must remember they are investing at their own risk. They should keep in mind that these cryptocurrencies have no underlying (asset)… not even a tulip.”
During the current budget session of Parliament, Finance Minister Nirmala Sitharaman confirmed that the RBI will work on issuing a central bank digital currency (CBDC).
Asked for a timeline for a digital rupee, Das said the RBI is proceeding cautiously and is mindful of risks such as cybersecurity and counterfeiting. For that reason, he said it is not possible to give a firm timeline for CBDC rollout.
Das also confirmed the central bank is developing both wholesale and retail CBDC models:
“We are not working with any external agency with regard to the CBDC. We are working with the CBDC within our ecosystem. Any decision to engage with other agencies will be taken at a later stage. We are open to trying all possible technologies for the CBDC.”
The introduction of a digital rupee will also require legal changes in India. The legal definition of a banknote will need to be widened through an amendment to the RBI Act to include digital currency issued by the central bank.