The Reserve Bank of India in its annual report released on Friday announced that they would take a graded approach towards the Central Bank Digital Currency, also known as CBDC, which would be in line with the monetary policy, financial stability and efficient operations of currency and payment systems.
RBI’s annual report pointed out, “The Reserve Bank proposes to adopt a graded approach to introduction of CBDC, going step by step through stages of Proof of Concept, pilots and the launch.”
A proof of concept is an experiment focused on discovering whether a thought or a concept can be created into a reality. It is also the process of verifying if that thought or concept will function as intended.
The report also said that the design of the CBDC needs to confirm to the current policies of the Central Bank. It said, “The Reserve Bank is engaged in the introduction of a central bank digital currency (CBDC) in India. The design of CBDC needs to be in conformity with the stated objectives of monetary policy, financial stability and efficient operations of currency and payment systems.”
While delivering the Union Budget for the year 2022, Finance Minister Nirmala Sitharaman had stated that India’s Central Bank Digital Currency, the ‘Digital Rupee’ will be implemented in 2022-23 using blockchain and other technologies.
Finance Minister Nirmala Sitharaman also stated that the introduction of the ‘Digital Rupee’ would bring a ‘big boost’ to the digital economy of the country.
It is interesting to note that the RBI Act, 1934, was amended by the Finance Bill, 2022, to establish a legal basis for the forthcoming CBDC, the Digital Rupee.
Moreover, the Indian government is considering the adoption of CBDC in two forms, Wholesale CBDC as well as Retail CBDC.
A CBDC is the legal tender issued by a country's central bank in a digital form and is based on blockchain technology.
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