India's central bank is exploring the creation of its own digital currency. The Reserve Bank of India announced Thursday that it has formed a multi-department panel to examine whether introducing a ce
India's central bank is exploring the creation of its own digital currency. The Reserve Bank of India announced Thursday that it has formed a multi-department panel to examine whether introducing a central bank digital currency would be technically feasible and strategically sound. The panel will submit its findings by the end of June.
Deputy Governor B P Kanungo said a digital currency would be issued by the central bank and considered a central bank liability. "They will be in circulation in addition to the paper currency that we have. It also holds the promise of reducing the cost of printing notes," he said.
The RBI also acknowledged that technological advances, including cryptocurrencies and blockchain systems, have the potential to improve both the efficiency and reach of the financial system. The move to study a digital currency reflects a broader pattern among central banks worldwide. Singapore unveiled a pilot program for a tokenized version of its currency back in 2016. China has been developing a digital currency, even while it has shut down cryptocurrency trading and initial coin offerings within its borders.
The RBI's stance on cryptocurrencies has hardened. The central bank views virtual currencies as creating risks related to consumer protection, market integrity, and money laundering prevention. It has banned regulated entities such as banks from dealing with cryptocurrencies or offering services to individuals and businesses engaged in digital currency trading or settlement.
The ban takes effect immediately. Banks must unwind their existing relationships with cryptocurrency market participants within three months. The RBI will release more detailed guidelines through additional circulars in the coming weeks.
The RBI has warned the public multiple times about the risks involved in trading or holding virtual currencies, including bitcoin.
