The need for a digital version of its fiat currency is being explored by the Reserve Bank of India. The bank justified its earlier apprehension in a recent outlook on payments in the digital age, but revealed it is now open to the possibility of a digital rupee.
The RBI has come to be seen as one of India’s major barriers to digital currency adoption. It has previously banned commercial banks from handling payments linked to digital currencies. However, the Supreme Court reversed this ruling in March 2020.
The regulator has now disclosed in a recent report that it is warming up to the prospect of a digital currency for the central bank. The report claimed that in India, digital currencies have gained substantial popularity. Regulators in India have taken a keen interest, skeptical of the associated risks at the same time. It added that:
”Nevertheless, RBI is exploring the possibility as to whether there is a need for a digital version of fiat currency and in case there is, then how to operationalise it.”
The paper is just the most recent indication that when it comes to a CBDC, the bank has left the door open. A year ago, a draft National Blockchain Strategy promoting a digital rupee was released by the country’s National Institute for Smart Government (NISG). A approved blockchain rollout for the CBDC was recommended.
Consulting with state and national governments, the Institute believes that a digital rupee will allow Indians to monetize their data.
The Institute claimed that securely unlocking the value of the data in the hands of citizens could give a major boost to the disposable incomes of citizens.
The RBI formed an inter-departmental group two years ago to discuss the feasibility of a CBDC. It cited as key factors for the CBDC the advent of private digital tokens and the growing cost of minting fiat currency. The RBI never made the group’s results public. However, it shelved its plans for the digital rupee in 2019.
A source told a local outlet that the digital currency is no longer desired by the government. It argues that it is too early to even consider a digital currency