Last week, the Reserve Bank of India (RBI) said it is exploring the issuance of a central bank digital currency (CBDC), but will pursue the idea in due course, local news outlet Livemint reported. The central bank governor Shaktikanta Das said it is ‘too early’ to talk about a CBDC owing to technological handicaps.
However, Das added that the RBI was strongly opposed to private digital currencies. The Indian government considers the trading and issuance of cryptocurrencies illegal in the country and asserts that currency is a sovereign function. In July, a government committee submitted its report suggesting the ban of all cryptocurrencies in India and proposed a draft bill, Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019.
“The world over, central banks and the governments are against private digital currency because currency issuance is a sovereign function and it has to be done by the sovereign,” Das said.
However, the central bank is not averse to the idea of digital currency. Das revealed that discussions were held with other governments and central banks about CBDC’s.
The significant global CBDC activity stems from Facebook’s announcement of Libra, which many central banks see as a threat to their control over monetary functions, including policy.
China is probably leading the CBDC race and has been making regular announcements regarding the development of a digital yuan. Last week, the French central bank announced it would be testing a CBDC targeted at institutions.
Given France’s membership of the EU, it would coordinate with the European Central Bank (ECB) which is also researching a digital Euro for retail and wholesale, backed by blockchain technology.
Earlier this year, the Bank for International Settlements (BIS) published a report saying over 70% of the banks were exploring CBDCs.