‘CBDC a play against India’s interest in cryptos’: What crypto industry stakeholders think about RBI’s concept note

India seems to be inching closer to launching its very own Central Bank Digital Currency (CBDC) as the Reserve Bank of India (RBI) released a concept note regarding the same on Friday. While many industry leaders and stakeholders see this as a step towards embracing blockchain technology, others find it to be a play against the current market interest in cryptocurrencies.

Naimish Sanghvi, co-founder of CoinCrunch India, stressed that RBI's CBDC seems to be a play against India’s interest in the realm of blockchain and crypto. He said, “CBDCs are nothing but a play against the current market interest in cryptocurrencies and blockchain.”

Rajgopal Menon, Vice President of WazirX exchange also noted that the concept note acknowledges India’s love for crypto but stresses that CBDCs are a safer and less risky alternative to cryptos. He said, “In a rather roundabout way, the RBI acknowledges India’s love for crypto by saying that CBDCs will provide the public with the benefits and features of crypto without the associated risks.” 

Sanghvi expressed his bewilderment on integrating blockchain technology with the ‘Digital Rupee’. He told Business Today, “ If you want a 'Digital Rupee", you don’t need a blockchain behind it to run it. You’re the RBI, you can create it. I simply do not understand the logic behind making CBDCs to allow customers to have the same feeling as cryptocurrencies without the risk. A Digital Rupee is much needed, it doesn’t have to be on blockchain”

Many industry stakeholders also found the CBDC concept note by RBI to be vague and unclear. Menon said, “Some points remain unclear - the note remains silent on whether the CBDC will be blockchain/distributed ledger-based or a typical centralised database.”

Amanjot Malhotra, Country Head - India for Bitay, also pointed out the anonymity linked to ‘retail CBDC’. Malhotra noted, “There is a certain degree of anonymity for retail CBDC.”

CBDCs can be broadly classified as Retail and Wholesale CBDCs. Wholesale CBDC refers to the digital currency that is used by financial institutions to buy and sell financial assets. It aims at replacing the RTGS systems. Retail CBDC refers to the digital currency that the public in general uses for day-to-day transactions.  

Oher stakeholders viewed RBI’s concept note as a step in the right direction. Sharat Chandra, co-founder of India Blockchain Forum told Business Today, “It's a right approach to foster public-private partnership for the adoption of CBDC.”

Menon also said, “The concept note speaks about the obvious benefits such as reducing costs, financial inclusion, innovating on the payment system and adding efficiency to the settlement system.”

It is worth noting that Finance Minister Nirmala Sitharaman announced that the RBI would mint India’s CBDC during the 2022 Union Budget in February.