The Reserve Bank of India (RBI) has announced that it will start the pilot test phase for its central bank digital currency (CBDC) and will involve four banks.
RBI to Commence CBDC Drive with Four Banks
Also known as the central bank of India, the RBI will begin its CBDC trial by using four public-private financial institutions. According to an insider report, the banks are State Bank of India, Union Bank of India, Bank of Baroda, and Punjab National Bank.
Moreover, this is a pilot CBDC, and the final launch is subject to the success of the trial phase.
Meanwhile, the RBI is in consultation with several financial institutions and fintech firms on the use case of the digital Rupee. The U.S.-based FIS is part of the companies in collaboration with the RBI. FIS is one of the leading firms that offer specialized CBDC services to central banks worldwide.
According to Julia Demido, a senior director at FIS, the company has had several active engagements with the RBI. FIS would provide its connected platform for the RBI to utilize in testing multiple CBDC options best suited to the country.
India’s CBDC Initiative
At the presentation of the federal budget for 2022 in February, the finance minister, Nirmala Sitharaman, revealed the move to launch a CBDC. According to the minister, the RBI will launch the digital Rupee later in the year after carrying out a test run.
In addition, the RBI also announced in May that it intends to integrate a stage-by-stage approach before the final launch.
The Central Bank of India further disclosed that the digital Rupee would be the virtual format of the country’s fiat. The RBI will implement a system to ensure the exchange of digital currencies with physical ones. Rabi Sankar, the RBI’s deputy governor, has previously labeled cryptocurrency as a Ponzi scheme, and banning the asset is for the best of the country.
The country’s crypto industry is one big venture that is too beneficial to be ignored by the government. More glaring is that over seven percent of India’s adult population holds one or more crypto tokens, according to 2021 research.
Crypto investment in India shot up during the COVID-19 pandemic, with India currently ranked sixth in the global crypto adoption index. More importantly, the crypto bull trend of last year has also attracted many to the industry, swelling the number of new entrants.
However, due to the absence of comprehensive regulations for the crypto sector, the high adoption rate may pose another issue for the government.
Furthermore, the Reserve Bank of India has been vocal about its stance concerning crypto of all kinds. The government, for its part, has yet to make a move to oversee the fledgling industry.
The government is equally aware of the rising crypto adoption, which is why it has a bill to address it. And market experts want the state to fast-track the bill to guide the sector in the interest of all.