TL; DR Breakdown:
- The Indian central bank may begin testing the digital rupee in December.
- The RBI is “extremely careful” with the developmental processes, according to the governor.
The central bank of India is considering launching pilot programs for a potential digital rupee, the nation’s legal tender, starting December 2021.
India is among the list of countries that began researching central-bank-issued digital currencies or CBDCs, following the transition from cash to digital payments amid the coronavirus pandemic.
RBI carefully studying digital rupee
In accordance with the words of Shaktikanta Das, the governor of the Reserve Bank of India (RBI), the first set of tests for the digital rupee might be launched in December. “I think by the end of the year, we should be able to — we would be in a position, perhaps — to start our first trials,” the governor told CNBC in an interview on Thursday.
The central bank is currently studying the impact the digital rupee would make regarding security, the circulation of the currency, monetary policy, as well as the country’s financial sector.
“We are being extremely careful about it because it’s completely a new product, not just for RBI, but globally,” the governor added. RBI will also decide on whether the digital rupee will run on a centralized ledger or distributed ledger technology (DLT).
Banks cling to CBDCs
Amid the pandemic, there was a global decline in cash transactions as people sought digital alternatives for safety reasons. Cryptocurrencies were the preferred option for many people. However, for consumer protection, central banks began discussing and researching CBDC, than supporting private cryptos like Bitcoin.
About five countries have launched a CBDC, with The Bahamian Sand Dollar being the first. The Republic of China is at the forefront of countries trialing digital currencies. On several occasions, the Chinese government has airdropped a significant amount of digital Yuan to residents as part of the pilot program.
It remains to be seen what digital rupee pilot programs constitute.