Reserve Bank of India likely to come up with digital currency model by year end

In a major development in going digital, the Reserve Bank of India is likely to come up with a model for fiat digital currencies by year-end, RBI Deputy Governor T Rabi Sankar informed on Friday, August 6. He said that the central bank is currently evaluating aspects like scope, technology, validation mechanism and distribution mechanism.

"It will be difficult to pin a date on it (introducing Digital Currency). We should be able to come out with a model in the near future, probably by the end of this year," Sankar said, reported PTI. 

In a July 22 speech, the RBI deputy governor said that India is thinking of a phased implementation of its own digital currency saying that the time for them is now. Notably, India is not the first country to foray into Central Bank Digital Currency (CBDC). China has already begun trials for its digital currency, while the US Federal Reserve and the Bank of England are also looking at it.

Going forward, digital currency is like to be in the arsenal of every central bank, Sankar said. He added that work on CBDC has been going on for many years, which have been popularised by cryptocurrencies like Bitcoin. RBI Governor Shaktikanta Das, however, said that private DCs are a concern for Central banks as they are not regulated.

Government's move to counter Crypto-Currencies

The government's decision to introduce Central Bank Digital Currency is to counter unregulated cryptocurrencies. "Developing our own CBDC could provide the public with uses that any private virtual currency can provide and to that extent might retain the public preference for the rupee. It could also protect the public from the abnormal level of volatility some of these virtual currencies experience," Sankar had said.

The volatility of cryptocurrency is a major concern for governments. For Instance, Bitcoin recorded an all-time high of $65,000 in April, however, the virtual currency fell below $42,000 in May.

Meanwhile, other popular Cryptos are Ethereum, Dogecoin, Stellar, Binance Coin, XRP, Cardano, Litecoin, USD coin, Chainlink and Uniswap. While those who play in the crypto markets don't see volatility as risk, but a chance to make quick gains.