- India joins the bandwagon as it plans to roll out its Central Bank Digital Currency this year.
- The Reserve Bank of India released a 50-page paper on Friday about the prospects of a digital Rupee being an alternative to cryptocurrencies.
- With government-backed currencies launched to replace Bitcoin and Ethereum, analysts review the prospects of an e-rupee alongside BTC in India.
With the mass adoption of digital assets, central banks are looking to compete by offering citizens government-backed assets. Although using blockchain technology, these Central Bank Digital Currencies (CBDC) are criticized for being centralized and government-issued like fiat.
The Reserve Bank of India (RBI) has proposed the rollout of its CBDC, described as the e-rupee, through a paper released on Friday. The 50-page paper released by the agency explains the importance of CBDCs, their functionality in the Indian economy, possible designs, and the implications of digital currency for monetary policy.
The proposed state-backed digital currency will be launched in two forms; wholesale between banks and retail to the public. Commercial banks can distribute the asset to their customers, although currency would be issued and controlled by the RBI.
Influenced by other countries, the RBI stated that the piloting of digital assets by China and 16 other countries made a case for its own development. According to the bank, the e-rupee will be released in phases with various test variations with the ultimate goal of implementing it as a digital alternative to fiat and bitcoin.
India’s apex bank views the widespread use of Bitcoin and Ethereum as a threat to the country’s economic stability, highlighting the government’s inability to control monetary policy and the risk of the public investing in private cryptocurrencies.
“CBDCs will provide the public with [the] benefits of virtual currencies while ensuring consumer protection by avoiding the damaging social and economic consequences of private virtual currencies.”
Blockchain set to grow in India
Despite India’s open criticism of cryptocurrencies, it has backed blockchain technology in the economy with several use cases. The Indian Finance Minister, Nirmala Sitharaman, has expressed optimism over the country’s future distributed ledger technology (DLT), projecting its adoption to “grow about 46% in the next few years.”
India has struggled with regulating private digital assets, which it views as a considerable risk for its citizens, citing known scams in other countries due to poor monitoring. Though the proposed e-rupee adopts DLT, it has already come under fire from digital assets executives as being created to “undermine the efforts of bitcoin in the last decade.”