The Reserve Bank of India (RBI) has stepped up its Central Bank Digital Currency (CBDC) project. The RBI has issued a 50-page concept note outlining their CBDC plans.
Many countries around the world including the US, Kenya, Iran, Tanzania, Israel, and Ukraine are working on CBDCs since they serve as direct replacements for cryptocurrencies. In most cases countries are looking to replace cryptocurrencies with regulated versions of digital currencies and the CBDC provide a perfect solution since they are regulated by the central banks or reverse banks.
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Earlier this week, The US House Financial Services Committee sent a letter to the Department of Justice (DoJ) requesting for their CBDC assessment and legislative proposal. The DoJ is expected to provide a response by October 15, after which further development will be conducted.
Reserve Bank of India digital rupee plan
The 50-page concept page released on Friday by the RBI highlighted why the bank is developing the CBDC and what the Indian citizens should expect with the digital Rupee.
According to a statement from India’s Finance Minister, Nirmala Sitharaman, the RBI is expected to launch the Digital Rupee in early 2023 and the launch of the concept note means the plan is right on track. The concept not, however, did not specify the expected date for launching the digital Rupee.
In a press release, the Chief General Manager of RBI, Yogesh Dayal, said:
“The Reserve Bank will soon commence pilot launches of eर for specific use cases. As the extent and scope of such pilot launches expand, RBI will continue to communicate about the specific features and benefits of eर from time to time.”
Why India is working on a CBDC
One of the driving factors for developing a CBDC, according to the released concept note, is to bring down the transaction costs in Rupee transactions in India.
Other important components of the digital Rupee that have been cited in the concept note include trust, safety, liquidity and settlement finality and integrity.
The Reserve Bank of India has gone ahead to introduce the first-of-its-kind classification of CBDC by classifying CBDC into retail CBDC (CBDC-R) and wholesale CBDC (CBDC-W).
The concept note reads:
“Retail CBDC would be potentially available for use by all viz. private sector, non-financial consumers and businesses while wholesale CBDC is designed for restricted access to select financial institutions. While Wholesale CBDC is intended for the settlement of interbank transfers and related wholesale transactions, Retail CBDC is an electronic version of cash primarily meant for retail transactions.”
The Reserve Bank of India also discussed the issuance model for the digital Rupee. The RBI will responsible for the direct issuance of digital currency while banks and other payment service providers will be responsible for indirect issuance.
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