The concept of a central bank digital currency, or CBDC, has been attracting interest across the globe with most central banks actively exploring and examining CBDCs, which according to experts could be the future of money.
CBDC, as the name suggests, is essentially a legal tender issued in a digital form, which is managed on a digital ledger (a blockchain).
In India, the Reserve Bank of India (RBI) has been working on a phased implementation strategy for a CBDC and the pilot may be launched by the end of this year.
PwC India has come out with a paper on ‘Central Bank Digital Currency in the Indian Context’ by Mihir Gandhi, partner & leader–payments transformation, PwC India and Vivek Belgavi, partner and leader, fintech, PwC India, wherein they discuss various models and use cases of CBDCs.
The financial advisory services firm has listed four major use cases of CBDC in the Indian context.
A possible use case for CBDC can be ‘fit-for-purpose’ money used for social benefits and other targeted payments in a country. For such cases, the central bank can pay intended beneficiaries pre-programmed CBDC, which could be accepted only for a specific purpose. For example, pre-programmed CBDC could be issued for LPG subsidies as direct benefit transfer (DBT).