On September 5th, local media reported that the Reserve Bank of India (RBI) was talking to state-controlled banking institutions and fintechs about conducting a trial of a central bank digital currency (CBDC).
An unnamed official of a public sector bank said that the trial could precede the launch of the CBDC by the central bank of India in this fiscal year.
The consultations
Amongst the consultations that the RBI has conducted, one of the fintech companies that it had reached out to included financial services company, FIS, which is based in the United States.
Julia Demidova, the senior director of FIS, also confirmed that the company had had a number of engagements with the Indian central bank.
She also asserted that the connected ecosystem of the company could be provided to the Reserve Bank of India (RBI) for experimenting different options pertaining to a CBDC.
On August 25th, FIS had announced that it was rolling out a CBDC Virtual Lab. The financial services firm had already been active in the central bank digital currency (CBDC) space.
It had hosted a number of roundtables and conferences on this particular topic.
As far as public sector banks are concerned, the RBI has reportedly had talks with Union Bank of India, Punjab National Bank, Bank of Baroda and State Bank of India.
The Indian central bank has discussed their participation in the trial and 50% share of these banks belongs to the Indian government.
Phased implementation
The RBI had mentioned previously as well that they would introduce a central bank digital currency (CBDC) in phases.
It talked about the phased implementation most recently as well, when it disclosed it would introduce a CBDC in three steps, starting this year and going till the next.
Nirmala Sitharaman, the Finance Minister of India, has also talked about the favorable impact and influence of a central bank digital currency (CBDC) on the economic growth of the country.
The real-time payment system of India called the Unified Payments Interface has been advertised as a rival to crypto and this means it is one to CBDCs as well.
Speaking in June at a conference of the IMF, an official of the RBI also said that they believe that the launch of a CBDC would be successful in killing the little case that could be made for private cryptocurrencies.
It should be noted that the Reserve Bank of India (RBI) has been against cryptocurrencies from the beginning because of their anonymous nature which leaves room for their illicit use.
While crypto trading is still legal in the country, the government has introduced some tough taxes on crypto-related activities, which has slowed down the industry’s growth significantly.
There was a time when crypto had also been banned in the country and a bill for doing so had also been drafted this year as well, but it did not make any progress.
Therefore, cryptocurrencies are still unregulated in India, while the RBI is focused on developing a CBDC.
