The Reserve Bank of India (RBI) has stated that the country must first adopt a basic model of central bank digital currency (CBDC) and use the payment system architecture as a backbone in order to create a cutting-edge system.
In its most basic form, a CBDC is a secure, reliable, and convenient alternative to cash. It can also take on the complicated shape of a financial instrument depending on numerous design decisions.
“Given its dynamic impact on macroeconomic policymaking, basic models must be adopted first and thoroughly tested to ensure that they have minimum impact on monetary policy and the banking system. India’s advancements in payment systems will serve as a solid foundation for making a cutting-edge CBDC available to its residents and financial institutions “In its study titled “Trend and Progress of Banking in India 2020-21,” the RBI stated.
The CBDC can provide users with benefits in terms of liquidity, scalability, acceptance, ease of transactions with anonymity, and speedier settlement as compared to existing forms of money, it said, adding that central banks around the world are debating how to deploy CBDCs.
The RBI has been researching use cases and developing a phased implementation approach to ensure that CBDC is introduced with little disturbance.
Central banks throughout the world are debating how to put CBDCs into practise, going beyond their initial exploratory expeditions.
The RBI’s Central Board had reviewed several issues of CBDC and private cryptocurrencies earlier this month.
The government received a request from the Reserve Bank of India (RBI) in October 2021 to alter the Reserve Bank of India Act 1934 to broaden the scope of the definition of “bank note” to encompass currency in digital form.
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