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The RBI has released a concept note to raise awareness of digital currency issued by central banks (CBDC)
To raise understanding of CBDCs in general and the intended features of the e-rupee, the Reserve Bank of India has released a Concept Note on central bank digital currency (CBDC).
On October 7, 2022, the Reserve Bank of India (RBI) published a “Concept Note” regarding central bank digital currency (CBDC) for India. The “Concept Note” covers important topics such technology and design options, potential applications for digital rupee, and issuance procedures, among others.
“The purpose behind the issue of this Concept Note is to create awareness about CBDCs in general, and the planned features of the Digital Rupee (e₹), in particular. It explains the objectives, choices, benefits, and risks of issuing a CBDC in India,” the RBI said in a press release.
“The Note also seeks to explain the RBI’s approach towards the introduction of the CBDC. It examines the implications of the introduction of CBDC on the banking system, monetary policy, financial stability, and analyses privacy issues,” the statement added.
The RBI said that it will soon commence pilot launches of e₹ for specific use cases. In the ‘Concept Note’, the RBI has also highlighted the need for a robust legal framework to back the issuance of e₹ as another form of currency.
“It was recommended to amend the RBI Act to cover e₹ in the definition of the term ‘bank note’ and also insert a new section in the RBI Act covering features pertaining to e₹ along with necessary exemptions. As the extent and scope of such pilot launches expand, RBI will continue to communicate about the specific features and benefits of e₹, from time to time,” the statement said.
The RBI has stated that the design of the digital money may be chosen based on the situation and the demand. The RBI stated that “e’s design should be compatible with the goals of monetary and financial stability.”
The RBI has been weighing the advantages and disadvantages of the implementation of CBDCs for a while, much like many other central banks.
The digital version of a nation’s legal tender is called CBDC. Using a distributed ledger technology (DLT) like Blockchain, it will keep track of its records. According to the RBI, there will be “no scope of anonymous transaction,” and all CBDC transactions will be able to be tracked.
