Further cementing India’s decision to introduce an in-house central bank digital currency (CBDC) in 2022-23, the Reserve Bank of India (RBI) proposed a three-step graded approach for rolling out CBDC “with little or no disruption” to the traditional financial system.
In February, while discussing the budget for 2022, Indian finance minister Nirmala Sitharaman spoke about the launch of a digital rupee to provide a “big boost” to the digital economy. In the annual report released on Friday by India’s central bank, RBI revealed exploring the pros and cons of introducing a CBDC.
In the report, RBI stressed the need for India’s CBDC to conform to India’s objectives related to “monetary policy, financial stability and efficient operations of currency and payment systems.”
Based on this need, RBI is currently examining the various design elements of a CBDC that can co-exist within the existing fiat system without causing disruptions. The Indian Finance Bill 2022, which enforced the introduction of a 30% crypto tax on unrealized gains, also provides a legal framework for the launch of a digital rupee:
“The Reserve Bank proposes to adopt a graded approach to introduction of CBDC, going step by step through stages of Proof of Concept, pilots and the launch.”
Halfway through 2022, at the proof-of-concept stage, RBI is in the process of verifying the feasibility and functionality of launching a CBDC.
Earlier this month, on May 17, RBI officials reportedly warned against crypto adoption, citing the risks of “dollarization” of the Indian economy.
As Cointelegraph reported, based on the Economic Times’ findings, key RBI officials including governor Shaktikanta Das raised concerns regarding the U.S. dollar-dominated world of cryptocurrencies. An unnamed official stated:
“Almost all cryptocurrencies are dollar-denominated and issued by foreign private entities, it may eventually lead to dollarization of a part of our economy which will be against the country’s sovereign interest.”
“It [crypto] will seriously undermine the RBI’s capacity to determine monetary policy and regulate the monetary system of the country,” they added.