India’s central bank, RBI, says it will soon start on the “limited pilot launches” of the country’s digital currency. The central bank mentions that various high-tech options will be tested. Thus, the choice of the final system will be based on the results.
The RBI’s fintech department, in a 51-page Concept Note on Central Bank Digital Currency (CBDC), notes that the activity will start as soon as the central bank prepares for a crisis moment.
Preparation Towards the Launch of Digital Rupee Pilot
Based on the ‘concept note,’ the growth of currencies is changing the very nature of money and its functions. Additionally, the 51-page file explains the aims, choices, benefits, and risks of issuing a CBDC in India.
Moreover, the RBI states that it has been actively searching for the pros and cons of introducing a central bank digital currency for a while.
Additionally, the bank says it is in view of wholesale and retail CBDCs. Their insight is that the former can improve payment systems. On the other hand, the latter can offer direct access to safe money for payment and settlement.
The bank considers different technological options depending on diverse use cases to ensure a stable architecture.
Consequently, RBI is taking key thoughts on technology, design choices, issuance ways, and privacy issues. It also considers the execution of CBDC on the banking system, monetary policy, and financial stability.
The Likely Motivation Towards CBDC
The main drive for introducing CBDC is to reduce the costs of physical cash management. The step boosts financial inclusion, improves efficiency, and encourages innovation in cross-border payments.
Additionally, the start of a digital rupee will be a way of reaching those individuals in remote locations. As a result, the move will guard against those areas and people who experience power and mobile network outages.
The RBI notes, however, that the planned move calls for tremendous planning in scope, cost, and timeline. This will allow a timely roll-out of different phases of CBDC introduction. Furthermore, the move will add a payment avenue for users but not replace the current payment systems in the country.
Vincent Munene is a freelance writer and a great blockchain enthusiast. Blockchain has changed his life in terms of financial freedom and in return, he likes to educate people and keep them up to date on everything blockchain. He is a Biochemist by profession and also loves to play the piano.