RBI working on strategy to roll out digital currency in a phased manner: FinMin

The Finance Ministry during the Lok Sabha question hour on Monday stated that the Reserve Bank of India (RBI) is working on a strategy for the implementation of digital currency in a phased manner. BJP MLA Rakesh Singh asked the Finance Ministry if the government proposes to start a digital currency in the country, the details of the same and whether it is a safe bet.

The Ministry of Finance in its response stated that the Central Bank Digital Currency (CBDC) is issued by the central bank and that the government had received a proposal from the RBI in October for amendment of the RBI Act, 1934 to “enhance the scope of the definition of ‘bank note’ to include currency in digital form.

“RBI has been examining use cases and working out a phased implementation strategy for introduction of CBDC with little or no disruption,” stated the ministry in its reply.

The introduction of CBDC has potential benefits including reduced dependency on cash, higher seigniorage due to lower transaction costs, and reduced settlement risk, it said. It would also lead to a potentially more robust, efficient, trusted, regulated and legal tender-based payments option, as mentioned by the ministry.

“There are also risks which need to be carefully evaluated against the potential benefits,” the ministry replied.

The government stated that since the CBDC is backed by the central bank of a government it will not have the volatility associated with private cryptocurrencies.

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