The Reserve Bank of India is advocating for banks to adopt blockchain and AI technologies

During a seminar organized by the RBI for Indian bank governors, Lieutenant Governor Mahesh Kumar Jain addressed the topic of risk management techniques to ensure long-term growth and stability. Jain emphasized the importance of robust corporate governance, governance structure and risk management systems in the future. He highlighted the current transformative landscape driven by technological advancements, escalating consumer expectations and the risks associated with cryptocurrencies.

Furthermore, Jain expressed concern regarding the emergence of new risks that could adversely affect technology-driven banking institutions. He emphasized that there is an urgent need for innovative solutions that can effectively meet the developing challenges within the financial industry.

Jain asserted, “To prepare for the future, Indian banks must prioritize digital transformation, improve customer experience, embrace innovative technologies such as AI and blockchain, invest in cyber security measures, explore collaboration opportunities with other stakeholders and ensure that their workforce is equipped with the necessary skills to thrive in the digital era.”

These statements were made against the backdrop of India’s uncertain attitude towards cryptocurrencies. The Indian Government introduced Official bill regulation for cryptocurrency and digital currency, 2021 in the Lok Sabha, the lower house of Parliament, with the aim of establishing a basis for the introduction of a digital currency issued by the RBI. However, the bill was not implemented into legislation.

Currently, there is no central authority in India that regulates cryptocurrencies as a form of payment. There are no specific rules, regulations or standards governing the handling of cryptocurrencies, which presents challenges when handling them.

India’s finance minister proposed taxation of digital assets, intensifying the ongoing debate over the legal status of cryptocurrencies in the country. The government announced a 30% tax on cryptocurrency earnings in the recent Union Budget 2022. While this move has been seen as a first step towards recognizing cryptocurrencies, the government has not issued an official statement regarding the legality of currencies like Bitcoin in India.

In November 2022, India launched a pilot program for its central bank digital currency (CBDC), targeting both the wholesale and retail segments. In March of the following year, offline functionality testing for the CBDC began. RBI chief Ajay Kumar Choudhary revealed India’s intention to use CBDC as a medium of exchange, further signaling the country’s exploration of digital currency options.