In a written response to a question about the Central Bank Digital Currency, or CBDC, the ministry of finance said it received a proposal from the Reserve Bank of India (RBI) in October 2021 for an amendment to the Reserve Bank of India Act, 1934 to broaden the scope of the definition of “bank note” to include currency in digital form. The CBDC, according to the Centre, has the potential to bring major advantages, such as a reduction in monetary reliance.
The administration fielded questions on the opening day of the winter session of Parliament about the impending cryptocurrency prohibition and the RBI’s intentions to launch an official digital currency. It inquired if the administration had received any proposals for the introduction of Central Bank Digital Currency in the country.
It also requested further information on the idea and the plans to use digital currency.
Pankaj Chaudhary, minister of state in the finance ministry, responded in writing. “A Central Bank introduces Central Bank Digital Currency (CBDC).” In October 2021, the government received a request from the Reserve Bank of India (RBI) to alter the Reserve Bank of India Act, 1934 to broaden the definition of “bank note” to include digital money. “RBI has been looking at use cases and developing a phased deployment approach for introducing CBDC with little interruption,” he added.
In response to a query about the objective of adopting digital money and if any analysis of the consequences has been conducted, the minister stated that the move will have considerable advantages.
“The introduction of CBDC has the potential to deliver major benefits, such as less reliance on cash, increased seigniorage owing to lower transaction costs, and lower settlement risk.” CBDC might potentially lead to a more reliable, efficient, trustworthy, regulated, and legal tender-based payment solution. In response, Chaudhary stated, “There are also accompanying hazards that must be carefully assessed against the possible advantages.”
“Unregulated cryptocurrencies have the potential to destabilise the macroeconomic system and cause large speculative bubbles.” In that sense, the RBI is correct.” In a story, a website reported the insider as stating.
The government’s response comes amid speculations that the RBI’s Central Bank Digital Currency will be included in the government’s impending Bill on regulating cryptocurrencies, which is expected to be introduced during the Parliament’s winter session. According to the Economic Times, which cited government sources, the Bill was enacted in response to the RBI’s worries about macroeconomic stability. “The government’s answer is not to outlaw cryptocurrencies, but to issue cryptocurrency via the RBI,” the official added.
The Cryptocurrencies and Regulation of Official Digital Currency Bill, 2021, which was just announced in a Lok Sabha bulletin, aims to outlaw all private cryptocurrency. It also plans to launch its own digital currency, which will be supported by the Reserve Bank of India. It also advocated “creating a conducive framework for the formation of the Reserve Bank of India’s official digital currency.” The bulletin also said that it aimed to “allow for limited exclusions to promote the underlying technology of cryptocurrencies and its uses…”
The RBI governor, Shaktikanta Das, told reporters earlier this year that testing for the official digital currency will most likely begin in December. “By the end of the year, I think we’ll be able to — we’ll be in a position, possibly — to start our first trials,” he told the news site in an interview.