A recent publication from the Reserve Bank of India reveals its consideration of a central bank-issued digital currency.
According to its 2017–2018 annual report, the Reserve Bank of India (RBI), has formed an interdepartmental group “to study and provide guidance on the desirability and feasibility to introduce a central bank digital currency [CBDC].” This effort is informed by the quickly evolving payments industry, the rise in tokens and cryptocurrencies, and the increasing costs of fiat currency management.
Although the RBI is considering creating a CBDC, the bank acknowledges the challenges that exist in the cryptocurrency landscape. The central bank notes that because of their limited supply, their lack of backing by authorities, and their user-driven value, cryptocurrencies are “highly volatile and, therefore, not a reliable medium of exchange or store of value.” Further, the RBI mentions that cryptocurrency price bubbles, like the bitcoin price surge in December 2017, raise “serious concerns for consumer and investor protection.”
These insights are by no means novel, but they do point to the banking industry’s reservations about cryptocurrencies. Other central banks, such as De Nederlandsche Bank in the Netherlands, have expressed similar concerns, going as far as saying that blockchain and cryptocurrency technology is “not sufficiently efficient, with regard to costs and energy consumption, and [it] cannot handle the large numbers of transactions.”
Still, the RBI does not condemn cryptocurrency usage and developments per se. The bank is “keeping a close watch on cryptocurrency” and advises that “developments on this front need to be monitored as some trading may shift from exchanges to peer-to-peer mode, which may also involve increased usage of cash.” However, it is notable that the bank issued a virtual currency ban (starting in April) to its regulated entities.
Like many central banks, the RBI remains skeptical of the crypto craze.
Daniel Putney is a full-time writer for ETHNews. He received his bachelor’s degree in English writing from the University of Nevada, Reno, where he also studied journalism and queer theory. In his free time, he writes poetry, plays the piano, and fangirls over fictional characters. He lives with his partner, three dogs, and two cats in the middle of nowhere, Nevada.
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