- The Reserve Bank of India (RBI) issued a 50-page concept note highlighting their CBDC plans.
- Reducing operational costs and increasing efficiency in the payments system have been cited as key reasons for CBDC development.
- In the first of its kind, the RBI classified CBDCs into token-based retail CBDCs and account-based wholesale CBDCs.
Central Bank Digital Currencies have been on many countries' governments' agendas as they serve as direct competition and even a potential replacement for cryptocurrencies from a solely financial perspective. While the likes of the United States are still deliberating their development, India released the first concept note for its Digital Rupee on Friday.
Digital Rupee on the way
The country's central bank RBI outlined their CBDC plans in a 50-page note which explained the whats and whys of the Digital Rupee's development as well as what citizens can expect from it.
Earlier this year, the country's Finance Minister, Nirmala Sitharaman, stated that the RBI might be looking to launch the Digital Rupee in early 2023. However, the concept note published on October 7 did not specify any particular date.
In a press release, the Chief General Manager of RBI, Yogesh Dayal, stated,
"The Reserve Bank will soon commence pilot launches of e₹ for specific use cases. As the extent and scope of such pilot launches expand, RBI will continue to communicate about the specific features and benefits of e₹, from time to time. (sic)"
As explained in the concept note, one of the key motivators of CBDC development is to bring down the operational costs involved in managing cash in India. In addition to this, trust, safety, liquidity and settlement finality and integrity have also been cited as important components of the digital currency.
The central bank also introduced the first of-its-kind feature for CBDC, classifying the Digital Rupee into retail (CBDC-R) and wholesale (CBDC-W) CBDCs. Explaining the difference, the concept note noted,
"Retail CBDC would be potentially available for use by all viz. private sector, non-financial consumers and businesses while wholesale CBDC is designed for restricted access to select financial institutions. While Wholesale CBDC is intended for the settlement of interbank transfers and related wholesale transactions, Retail CBDC is an electronic version of cash primarily meant for retail transactions."
Discussing the model for issuance and management, the RBI is looking to introduce direct and indirect issuance. Direct issuance will be helmed by the RBI, while indirect issuance will be the responsibility of banks and other payment service providers.
Even though the development is in the early stages, India is still farther ahead of many countries.
US inches closer
As reported by FXStreet earlier this week, The US House Financial Services Committee sent a letter to the Department of Justice requesting their CBDC assessment and legislative proposal.
The House Committee also analyzed whether the Federal Reserve has the authority to issue a CBDC without authorizing legislation and asked whether or not legislative changes would be necessary to issue a CBDC.
The DoJ has been asked to provide a response by October 15, post which further development can be conducted.
