Crypto

As RBI plans digital currency pilots, legal hurdles remain

Pratik Bhakta

August 23, 2021 | 5 Min Read

With the buzz for a government-backed virtual currency growing louder, authorities have been evaluating various options and uses. But the lack of a legal framework is restricting progress

The Reserve Bank of India is evaluating multiple use cases for a central bank-backed digital currency, from solving for offline payments to enabling instant interbank large-value settlements, according to two sources aware of the developments.

RBI is also evaluating pilot projects in collaboration with commercial banks and the National Payments Corporation of India to assess how a CBDC can be used to solve problems that current digital payment ecosystems are not able to address.

But these innovations cannot progress beyond trials until the government passes a law allowing RBI to issue a digital currency. Globally, Russia, China, the US, the UK and Sweden are testing their own CBDCs.

A central bank digital currency can usher in transformations on multiple fronts. One idea gaining traction in policy circles is the wholesale use of CBDC for instant interbank settlements, reduced from 2-3 days currently. Even international remittances between friendly countries can be done instantly through CBDC. Another idea is to issue token-based digital currency for targeted transfers of benefits, said a senior fintech executive.

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