RBI forecasts CBDCs could displace private cryptocurrencies

CBDCs are capable of fully displacing private virtual currencies, including Bitcoin. This was stated by RBI Deputy Governor T. Rabi Sankar, according to Outlook.

The comment came after the Finance Ministry announced a report on cryptocurrencies.

Deputy Governor T. Rabi Sankar spoke of the regulator’s “methodical work” on implementing the digital rupee. A CBDC would provide better management of the national currency, reduce settlement risks in the interbank system, and become a superior alternative in cross-border payments, he added.

The official stressed that the RBI is approaching this initiative cautiously toward this initiative, given the potential negative impact on the banking system through restrictions on the ability of lending institutions to mobilize deposits and their role in implementing monetary policy.

“We will go through the concept-verification process, followed by pilot projects and phased deployment. We intend to learn along the way. The digital journey can continue indefinitely,” — he explained.

Sankar rejected the view of central banks in other countries that advocate embracing stablecoins.

“I am confident that now, after the collapse of Terra USD, they understand the difference between money and currency.” — the official said.

The RBI deputy governor urged the IMF to take the lead in shaping the position on CBDCs and cryptocurrencies.

The regulator has long been an unwavering foe of digital assets. In 2018 the RBI banned banks and financial institutions from providing services to companies dealing in cryptocurrencies. In March 2020 the Supreme Court overturned the ban.

In May 2021 it emerged that the central bank asked banks to sever ties with Bitcoin exchanges. Subsequently the regulator urged supervised institutions not to cite the repealed directive banning cryptocurrency operations.

As noted, the RBI began examining the potential of the digital rupee in early 2021.

Subscribe to ForkLog’s Telegram updates: ForkLog Feed — the full news stream, ForkLog — the most important news, infographics and opinions.