T Rabi Sankar, deputy governor of the Reserve Bank of India (RBI) discussed India’s possible position in bringing change in the crypto environment with the help of central bank digital currencies (CBDCs) at an International Monetary Fund (IMF) discussion.
During the discussion with the IMF, Sankar spoke about India’s in-house peer-to-peer fiat payments system, UPI (Unified Payments System), quoting its success to the simplicity of the system’s operation. He mentioned that UPI had seen 160 percent average adoption and transaction growth per annum in the last five years. He compared UPI and blockchain technology, stating that UPI has had significant growth, and blockchain has still not managed to establish itself and is still termed an up-and-coming feat.
“Blockchain, which was introduced six-eight years before UPI started, even today is being referred to as a potentially revolutionary technology. [Blockchain] use cases haven’t really been established that much at the speed it initially was hoped for.”
While UPI has been a huge success amongst masses in India, RBI issued a statement about how a large percentile of the Indian population still cannot access UPI due to the unavailability of the required devices. The Government of India is taking action to tackle this problem. Offline platforms are slowly being introduced to the Indian population to increase accessibility.
While talking about digital currencies, the governor also mentioned how banks will always be an important part of providing liquidity services to the masses and technology will remain a tool and cannot be used for creating cryptocurrencies. Sankar stated that, “A currency needs an issuer or it needs intrinsic value. Many cryptocurrencies, which are neither, are still being accepted at face value. Not just by gullible investors but also by experts, policymakers or academicians.”
Sankar further clarified the RBI’s stance on stablecoins. He stated that the RBI did not believe that stablecoins like the USDT peg of 1:1 to fiat currencies should be accepted blindly. Speaking about India’s digital rupee, the deputy governor stated, “believe that central bank digital currencies (CBDCs) could be able to kill whatever little case that could be for private cryptocurrencies”.
RBI released an official statement on the 28th of May, talking about a three-level system through which CBDC could be slowly introduced to the masses without changing much of the already existing system that handles the country’s finances. The central bank is developing the CBDC to tackle existing issues in the traditional monetary and financial system.