The RBI is currently trying out the various technologies and models available for CBDCs
Reserve Bank of India Governor Shaktikanta Das has reiterated that the central bank has major reservations about the impact of cryptocurrencies on the macroeconomic and financial stability of the country.
The regulator pointed out that widespread crypto adoption will undermine the RBI’s ability to deal with issues related to financial stability.
Since introducing a 30% tax on income earned through cryptocurrencies in the country, Indian authorities have been keen to clarify that the taxing of crypto does not indicate that the government has legalised or supports digital currencies.
Das reminded investors to exercise caution while investing in digital assets, stating that cryptocurrencies don’t have any underlying asset:
“I think it is my duty to tell investors that when they are investing in cryptocurrencies, they should keep in mind that they are investing at their own risk. They should keep in mind that these cryptocurrencies have no underlying (asset)… not even a tulip”
In the ongoing budget session of the parliament, Indian Finance Minister Nirmala Sitharaman confirmed that the RBI will be working on a central bank digital currency.
When asked to propose a timeline for the Digital Rupee, Das said that the RBI was proceeding cautiously with risks such as cyber-security and counterfeiting in mind. Thus, it is not possible to set a deadline for the introduction of the CBDC, he added.
Das also confirmed that the central bank is working on both wholesale and retail models of CBDCs:
“We are not working with any external agencies when it comes to the CBDC. We are working with the CBDCs in our ecosystem. Any decision to engage with any other agencies will be taken later. We are open to trying out all possible technologies for CBDC.”
The introduction of the Digital Rupee will also involve legal procedures in India. The scope of the definition of a banknote will have to be increased to include digital currency issued by the central bank in the RBI Act via an amendment.