He said that the thinking about Central Bank Digital Currency (CBDC) has progressed a lot and many central banks of the world are working in this context. Shankar said CBDCs need to protect consumers from the “horrific level of volatility” seen in some digital currencies that do not receive any government guarantees. He said that the central banks of various countries are exploring the possibility of CBDC and some countries have presented such a perception.
Ideas about digital currency close to implementation
Participating in the discussion during an online program, he said that probably the idea about digital currency is close to implementation. “Like other central banks, RBI has been looking into various aspects of digital currency for a long time,” the deputy governor said.
It is noteworthy that a high-level inter-ministerial committee constituted by the Finance Ministry has examined the policy and legal framework and recommended introducing CBDC as a digital currency in the country.
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He said that the RBI is working on a strategy to implement its own digital currency in a phased manner and it can be implemented in such a way that there is no impact on the banking system and monetary policy.
need to change the law
The deputy governor said this would require a legal change as the existing provisions under the Reserve Bank of India Act have been made keeping the currency physical in mind. This would also result in the need for amendments to the Coinage Act, FEMA and the IT Act, he added.
There are some risks associated with digital currency
Shankar also mentioned some of the risks associated with digital currency. Like withdrawing money from the bank suddenly under pressure. “There are risks involved but they need to be carefully evaluated considering the potential benefits,” he said.
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