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RBI to begin pilot project on digital currency for limited use
The Reserve Bank of India (RBI) will soon commence limited pilot launches of the digital rupee for specific use cases, the central bank said today in a concept paper. The concept paper was released on Friday as it tests the digital currency in India. The Reserve Bank of India has been exploring the pros and cons of a central bank digital currency for some time and is currently engaged in working towards a phased implementation strategy, the bank said.
The central bank also said that Concept Note on Central Bank Digital Currency was issued to create awareness about Central Bank Digital Currency (CBDC) in general and the planned features of the Digital Rupee.
The RBI, in its concept paper on Central Bank Digital Currency (CBDC), said that use cases are being examined for an e-rupee in a way that there is minimal or no disruption to the financial system. In February, the Central government had said that a digital rupee will be launched during the course of the current financial year.
"As the extent and scope of such pilot launches expand, RBI will continue to communicate about the specific features and benefits of e-rupee, from time to time," the RBI’s concept note said.
The concept note also discusses key considerations such as technology and design choices, possible uses of the digital rupee, and issuance mechanisms. The RBI concept note also examines the implications of the introduction of CBDC on the banking system, monetary policy, and financial stability, and analyses privacy issues.
"It is the responsibility of central bank to provide its citizens with a risk free central bank digital money which will provide the users the same experience of dealing in currency in digital form, without any risks associated with private cryptocurrencies," the Reserve Bank of India said.
The central bank said there's merit in both retail and wholesale digital currency, indicating that it may consider both.
The digital rupee seeks to replicate the features of cash. It wouldn't, however, pay interest, unlike the bank deposits.
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