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India may have a New Central Bank Digital Currency, the Reserve Bank of India is exploring the possibility

The statement from the Reserve Bank of India comes against the backdrop of private digital currencies, virtual currencies and cryptocurrencies that are gaining popularity in recent years.

The Reserve Bank of India (RBI) said it is studying whether there is a need to introduce the Country's Central Bank Digital Currency (CBDC) and is exploring ways to operate it, if necessary.

The statement from the Reserve Bank of India comes against the backdrop of private digital currencies, virtual currencies, and cryptocurrencies that are gaining popularity in recent years. In India, regulators and governments have been skeptical of these currencies and are apprehensive of the risks associated with them.

The Reserve Bank of India (RBI), publishing a booklet on payment systems in India, said: "However, the Reserve Bank of India is exploring whether there is a need for a digital version of fiat currency and, if any, how to operationalise it. "

What is the Central Bank's Digital Currency?

CBDC is legal tender and central bank liabilities in digital form denominated in sovereign currency and displayed on the central bank's balance sheet. It is in the form of electronic currency that can be converted or exchanged at par with cash in similar denominations and traditional central bank deposits.

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"Innovations are rapidly changing the payments space. This has led central banks around the world to examine whether they could leverage technology and issue fiat money in digital form," said the Reserve Bank of India.

Has the concept been discussed before?

In the Reserve Bank of India (RBI) bulletin for February 2020, the central bank said, citing a central bank survey conducted by the Bank for International Settlements, that about 80 percent of the 66 central banks that They responded that they had started projects to explore the use of digital currency by banks in some way.

"These central banks are contemplating and studying the benefits and potential impacts of the central bank digital currency on the economy. We analyze below the efforts made by the two central banks in China and Sweden in this regard," said the then bulletin of the RBI.

The fact that the Reserve Bank of India is now evaluating the possibility of issuing its cryptocurrency shows the importance of this sector in the future of currency regulations.

Wasn't India Skeptical earlier?

The Governor of the Reserve Bank of India, Shaktikanta Das, opposed private cryptocurrencies, stating that the sovereign could be the only source of currency in the country. In December 2019, Das said it was too early to talk about a central bank-issued digital currency due to technical barriers, but the Reserve Bank of India is looking into the idea.

In addition to the Reserve Bank of India, even the central government has been skeptical of privately issued cryptocurrencies. In fact, there is a bill in Parliament calling for a complete ban on private digital currencies. The bill has still not seen the light of the day.

Cryptocurrencies issued by the private sector made headlines around the world with a large amount of reported trading. Bitcoin is trading at over 25 lakh rupees and Ethereum is currently trading at over 1 lakh rupees.

In March 2020, the Supreme Court of India lifted the ban imposed by the Reserve Bank of India on banks dealing with cryptocurrency exchanges. This has allowed cryptocurrency exchanges to restart their operations in the country and dive into the booming cryptocurrency trading business in the world. Players such as WazirX, Unocoin, and Zebpay brought the spotlight with a massive jump in trading volumes during the days of the pandemic.

Also Read: EC rolls out digital voter ID cards: All you need to know

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