Rise in Digital Payments has India Exploring the Potential of Digital Rupee
While India has had an often adversarial, murky attitude towards digital assets and cryptocurrencies, the Reserve Bank of India is currently contemplating whether there is a need for a digital version of its sovereign currency, the Rupee. Along with creating a crypto-based iteration of it, the RBI is also hypothesizing how best to operationalize it.
According to a booklet that was recently published by the RBI, this news covers the journey and evolution of payment and settlements systems in India from 2010-20. The Central Bank stated within its booklet,
“Private digital currencies (PDCs) / virtual currencies (VCs) / cryptocurrencies (CCs) have gained popularity in recent years. In India, the regulators and governments have been skeptical about these currencies and are apprehensive about the associated risks.”
“Nevertheless, RBI is exploring the possibility as to whether there is a need for a digital version of fiat currency and in case there is, then how to operationalize it.”
This conversation regarding the value of a digital version of India’s fiat stems from the rapid increase in digital payments; which are expected to increase threefold in the coming years. Even so, the RBI must contend with a considerable amount of skepticism, even hostility, towards cryptocurrencies from local regulators.
India’s Love-Hate Relationship with Crypto
India’s relationship with cryptocurrencies is a matter of common knowledge, having been opposed to their use for some time now. April 2018, for example, India joined China as the former’s RBI imposed a blanket ban on cryptocurrency transactions, which was only overturned in March 2020.
Though, India finds itself being the latest among a growing group of countries considering and testing CBDCs. The likes of Sweden and China having already tested their e-Kroner and digital yuan, respectively. The European Union and the U.S. are also getting work underway for a crypto-iteration of their fiat currencies.
Even so, RBI’s Governor, Shaktikanta Das has previously cooled the metaphorical jets of crypto enthusiasts; having commented in December 2019 that discussions were at an incredibly early stage.