According to India’s central bank governor, Shaktikanta Das, the Reserve Bank of India may launch its first digital currency trial programs by December.
Many central banks, including those in Europe, the United Kingdom, and China, are exploring digital currencies that they would issue. Notably, digital currencies will have to go to either commercial lenders or the public directly.
Significantly, they are CBDC legal tender in digital form and are essentially the online version of their respective fiat currencies. That would be the digital rupee, in India’s case.
Das announced that they are very careful about CBDC as it’s completely a new product, not just for RBI but globally.
Remarkably, the RBI is studying different aspects of a digital currency, including its security, impact on India’s financial sector. Moreover, RBI is trying to explore how it would affect monetary policy and currency in circulation.
Shaktikanta Das also announced that the central bank is exploring having a centralized ledger for the digital currency or the distributed ledger technology (DLT).
DLT refers to a digital database that enables multiple users to access, share, and record transactions simultaneously. A centralized ledger indicates that the database is a part of a single entity. Remarkably, in this case, it has regulation from the central bank.
Das also reported that they would likely start their first trials by the end of 2021.
Central Banks Started Looking Into Cryptocurrencies Over the Past Year
In July, T Rabi Shankar, his deputy, announced that the central bank was working toward a phased implemental strategy for a digital currency.
Following the decline in cash usage and growing interest in cryptocurrencies such as Bitcoin, central banks started looking into digital currencies over the past year.
The People’s Bank of China (PBOC) is leading the way, with real-world trials already in place across several cities. Furthermore, the European Central Bank (ECB) and the Bank of England (BoE) look into a digital euro and a U.K. CBDC.
Central bank digital currencies differ from cryptocurrencies in several major ways:
- They would be fully regulated and under a central authority, typically the central banks.
- The central bank’s digital currency is not a tradable asset with wild price fluctuations. It will function more like its fiat counterparts and will be widely accepted.