New Delhi:
Central Bank Digital Currency or CBDCs have captured the imagination of central banks around the world. Recently, the Reserve Bank of India (RBI) launched the ‘digital rupee’ pilot project and reports suggest that it may expand the project further “based on the lessons learned from the current pilot.”
Governor Shaktikanta Das’ recent statement on CBDC adoption indicates that the “digital rupee” may get a boost.
“Central bank-issued digital currencies are the future of money, and their use can help save on logistics and printing costs,” he said at a recent event.
With the Union Budget around the corner, industry watchers are expecting an announcement regarding the digital rupee.
“I think CBDC will be a hot topic of discussion in this year’s budget,” says Kamlesh Nagware, CTO at Snapper Future Tech, a blockchain firm. He believes that Finance Minister Nirmala Sitharaman may announce measures to enable offline, cross-border payment and digital assets ecosystem for CBDCs.
The Government of India has been a voter for CBDCs. In his last budget speech, Sitharaman said the “digital rupee” will lead to a more efficient and cheaper currency management system.
For the uninitiated, CBDCs are the digital version of the official currency, backed by the central bank. They are very often supported by blockchain technology, as is the case with the digital rupee.
“In the CBDC trial phase, 16,000 users made e-rupee transactions in one month. The beginning is excellent and has huge potential for the future of e-rupee,” opined Amogh Tiwari, founder of DayFi, an NFT-based financial company. .
Experts believe that blockchain is likely to gain momentum in the coming years, with the Ministry of Electronics and Information Technology coming out with a “National Strategy on Blockchain” in December 2021. Interestingly, this report mentions the idea of a government-backed digital currency wallet for transactions in the farm sector.
“We expect proper allocation for blockchain and its application to Indian infrastructure like cargo, finance, digital documents etc in this year’s budget,” says Tiwari.
CBDCs are among the most well-known applications of blockchain technology, which is considered safe, reliable and transparent. However, any discussion of CBDCs is incomplete without comparison to crypto, which also runs on the principles of blockchain.
With the RBI governor calling cryptocurrency “nothing but gambling” while calling for an outright ban and the finance minister seeking international cooperation for crypto regulation, the future of the Indian crypto market continues to be in limbo.
“There is no connection between crypto and CBDC. The government will focus on the latter as an alternative,” says Nagware. Mr Tiwari also speaks on similar lines and adds that CBDCs represent a significant step in the adoption of blockchain.
Both believe that digital rupee will help in greater adoption and mainstreaming of digital currencies in general across the country. “E-Rupee will help build stronger regulations because the government and stakeholders can have a broad understanding of digital currency and digital assets,” says Nagware.
According to an estimate, adopting digital assets like CBDC and other blockchain-backed assets could help India add $1 trillion to its economy by 2032.
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