The Reserve Bank of India (RBI) has been working on the Central Bank Digital Currency (CBDC) for the last few years and it will be launched ahead of the crypto bill enactment in the parliament, said a finance ministry official who did not wish to be named.
The draft Crypto Bill was supposed to pave way for CBDCs too. Just like the rupee notes, a paper contract in which the RBI governor promises to pay bearer the mentioned amount, a CBDC is defined as the legal tender issued by a central bank in a digital form.
“It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. Only its form is different,” deputy governor of RBI T Rabi Shankar had earlier explained.
According to a finance ministry official, the Reserve Bank of India Act has already been amended in this regard and the Financial Act 2022 equipped the central bank to launch CBDC.
“We have been closely monitoring the international regulatory developments as well as what’s happening in the Indian market. Crypto is still evolving. While the draft Bill needs to adequately address subjects like metaverse, web3, DeFi, gaming and other areas, CBDC simply can’t wait,” the official added.
The Financial Act 2022 had earlier inserted a new Section 22A in the Reserve Bank of India Act, 1934 and amended Sections 2 and 22 of the Act. It proposed that CBDCs should also be regarded as bank notes.
The RBI governor Shaktikanta Das has announced plans to launch CBDCs by the end of FY 2022-23.
On CBDC use cases, deputy governor Shankar earlier elucidated that there is a unique scenario of the increasing proliferation of digital payments in the country coupled with a sustained interest in cash usage, especially for small value transactions. To the extent the preference for cash represents a discomfort for digital modes of payment, CBDC is unlikely to replace such cash usage. But if we talk about the reasons such as anonymity, preference for cash for its anonymity can be redirected to acceptance of CBDC.