RBI set to introduce digital currency; no volatility unlike private cryptocurrency: Centre

The RBI is preparing a phased implementation strategy for introduction of Central Bank Digital Currency (CBDC), the Finance Ministry told Lok Sabha on Monday. This was in response to BJP MP Rakesh Singh's unstarred question wherein he asked the Centre on the possibility of rolling out digital currency, its practicability and utility. In October 2021, the RBI sent a proposal to the Union government to amend the Reserve Bank of India Act, 1934 to expand the definition of 'bank note' to include currency in digital form. 

The MoS Finance remarked, "Introduction of CBDC has the potential to provide significant benefits, such as reduced dependency on cash, higher seigniorage due to lower transaction costs, reduced settlement risk. Introduction of CBDC would also possibly lead to a more robust, efficient, trusted, regulated and legal tender-based payments option. There are also associated risks which need to be carefully evaluated against the potential benefits". At the same time, the Centre clarified that CBDC will not have volatility associated with private cryptocurrencies as it will be backed by the RBI. 

Centre to introduce cryptocurrency bill

On November 13, PM Modi chaired a meeting on the way forward for cryptocurrency and flagged the issue of misleading non-transparent advertising regarding the same. As per sources, this meeting was conducted after a consultative process done by the Reserve Bank of India (RBI), the Finance Ministry and the Ministry of Home Affairs. While asserting that crypto markets cannot be allowed to become avenues for money laundering and terror financing, sources indicated that the Centre will continue to engage with all stakeholders.

Speaking publicly on cryptocurrency for the first time during his keynote address at The Sydney Dialogue on November 18, PM Modi remarked, "It (global collaboration between countries) should also recognise national rights and at the same time, promote trade, investment and larger public good. Take cryptocurrency or bitcoins for example. It is important that all democratic nations work together on this and ensure that this does not end up in wrong hands, which can spoil our youth."

Meanwhile, the Centre is set to table The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 in the Winter session of Parliament. The Bill aims to create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India. It also seeks to prohibit all private cryptocurrencies in India except for certain exceptions to promote the underlying technology of cryptocurrency and its uses.