RBI shelves plan to launch digital currency

The RBI has shelved its plan to launch a digital currency.

The central bank, in April last year, had announced it was looking at issuing its own Central Bank Digital Currency (CBDC) after it tightened the noose on cryptocurrency exchanges operating in the country, forcing several of them to shut shop.

It had also set up an inter-departmental group to study the potential advantages and feasibility of the digital currency and submit its findings in June 2018. However, it has not made public any of the findings of the feasibility report. “The government doesn’t want the digital currency any more. It thinks it is too early to even think about a digital currency,” a source said.

RBI did not respond to BusinessLine’s query in this regard.

The regulator’s idea in launching the digital currency had been to check key concerns over black money, money laundering and cyber-security threats, among others. However, as per the response to an RTI query filed by BusinessLine in September last year, the RBI still does not have a formal unit for tracking of, and policy-formation on, technologies such as blockchain and digital currency. This could reflect the lack of preparedness for cryptocurrency trading.

Praveen Kumar, founder of cyrptocurrency exchange and blockchain start-up Belfrics, said: “It is premature for RBI to launch crypto-rupee, as more understanding of the crypto economy need to be achieved. It is a right decision to delay the process and see how the publicly traded peer-to-peer economy is shaping up.”

The Centre should wait and watch the actions of smaller and advanced nations like the UAE and Singapore, which have plans to convert their currencies into blockchain-based ones.

Matter of time

“Crypto-currencies will be mainstream and ubiquitous, and governments all over the world will launch fiat cryptocurrencies, whether out of compulsion or choice,” said Kunal Nadwani, CEO of uTrade Solutions and a blockchain expert. “Since governments have the power of taxation, and they can declare any digital token as legal tender for payment of taxes, they can have fiat tokens. But it will take time before central banks are able to make this transition because the economic effects of crypto are sizeable and largely unknown.”

While several central banks , including those of Canada, China, Sweden and Uruguay — are considering cryptocurrencies, none has gone ahead with it. The US Fed, too, dropped its digital currency plan.