Private digital currencies cite possible danger, CBDC safer alternative: RBI Governor

Digital currency future: Stating that Central Bank Digital Currency (CBDC) or digital currency, can lead to financial inclusion, the Reserve Bank of India Governor Shaktikanta Das on Monday said that it offers a much safer alternative to potentially dangerous private digital currencies.
"This form (CBDC) can lead financial inclusion and offer a much safer alternative to private digital currencies, which, as per us are potentially dangerous," Das said at the BIS Innovation Summit 2024 while participating virtually in the discussion. 
In view of exchanges that do not fulfill the guidelines of the government, private digital currencies, popularly referred to as cryptocurrency are currently unregulated in India. The government at present does not register crypto exchanges. It continues to say that crypto assets, which are defined as “borderless” and require international collaboration.

Cross border payments 

From a cross-border payments perspective, Das said that the feature of settlement finality can to a great extent reduce the cost of transactions. Laced with its unique technology, CBDC has a transformative potential, said Das. The RBI Governor highlighted three key features, which include anonymity, ease of usage, and finality of settlements, adding that India has adopted a phased implementation of CBDC.

Notably, the digital currency was launched in India on a pilot basis, both in the wholesale and retail categories towards the end of 2022. " Going ahead, the advantages of CBDC will be more visible when we enable offline use and programmability features," the RBI governor said, at the deliberations held to discuss the future of CBDC and the road ahead for retail versus wholesale CBDC.  "A key objective of the pilots has been to study the change in consumer behaviour vis-a-vis bank deposits. We need many more transactions to understand its wider economic effects, especially on monetary policy and the banking system," Das added. 

“Till now, we have gained significant insights from the two pilots, both wholesale and retail on various aspects, such as design, technology, and user behaviour. These insights are facilitating the scalability, resilience, and agility of the CBDC. The pilots are also enabling us to make informed decisions, like positioning the CBDC alongside the UPI.” The RBI Governor further said the RBI is working on making the CBDC transferable in offline mode as well.

(With agency inputs)