The Reserve Bank of India sets ambitious targets to increase CBDC transactions, leverages UPI network, and warns about the risks of stablecoins.
Key Points
- RBI aims to increase CBDC transactions to one million per day by end of 2023.
- CBDCs are digital currencies issued and regulated by a central bank, functioning like traditional money.
- RBI plans to leverage UPI network to boost CBDC usage and reduce cross-border transaction costs.
- Deputy Governor warns about stablecoins threatening policy sovereignty and emphasizes the need for each country to have its own CBDC.
The Reserve Bank of India (RBI) has set an ambitious target to increase the number of Central Bank Digital Currency (CBDC) transactions to one million per day by the end of 2023, according to Deputy Governor T Rabi Sankar. Currently, the RBI records around 5,000-10,000 transactions daily with its retail CBDC, the e₹-R.
R B I to bring in Central Bank Digital Currency (CBDC).
Why is WEF (deep state controlled) agenda being implemented in India?
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Understand what’s being done to you, slowly.. pic.twitter.com/WkUQdpw9Xa— Ritu #जिष्णु (@RituRathaur) July 12, 2023
What are CBDCs?
CBDCs are digital or virtual currencies issued and regulated by a country’s central bank. They function like traditional money but in digital form, allowing for everyday transactions, cross-border payments, and other financial operations. CBDCs are backed by the monetary reserves of a country and represent a digital version of its fiat currency.
Leveraging UPI Network to Boost CBDC Usage
The RBI plans to enhance CBDC usage by leveraging the Unified Payments Interface (UPI) network. Deputy Governor Sankar explained that there will be one QR code, which users can swipe using the CBDC app. If the merchant has a CBDC account, the payment will settle in the CBDC wallet. Alternatively, if the merchant does not have a CBDC account, users can choose to make the payment using UPI.
Currently, 1.3 million customers and 0.3 million merchants are utilizing the retail digital Rupee, with 13 banks offering retail CBDC. These banks have already begun implementing interoperability, allowing the QR code to be scanned using the CBDC app. Full interoperability with UPI for CBDC customers is expected to be achieved by the end of the month. The RBI plans to onboard the remaining 20-25 banks, although this process may take longer.
The Potential of CBDCs in Reducing Cross-Border Transaction Costs
Deputy Governor Sankar highlighted the potential of CBDCs in reducing costs for cross-border transactions. Currently, World Bank estimates suggest that small value cross-border transactions carry a high cost of 6%. CBDCs could offer a more cost-effective solution for these transactions.
While Deputy Governor Sankar expressed optimism about CBDCs, he also warned about the risks posed by stablecoins to policy sovereignty, especially for countries like India. Stablecoins, linked to underlying currencies and issued by private companies, have the potential to replace the use of the national currency and transfer seigniorage to private issuers, leading to the risk of dollarization.
End Note
Stablecoins are a type of cryptocurrency designed to maintain a stable value relative to a specific asset or a pool of assets. They can be pegged to a currency and are often used to provide stability in highly volatile crypto markets. Examples include Tether (USDT) and USD Coin (USDC), which are not issued by central banks or governments, weakening authorities’ control over them.
To address the risks associated with stablecoins, Deputy Governor Sankar suggested that each country should have its own CBDC, with mechanisms for these CBDCs to interact and transact with each other.
The RBI is considering the aspect of anonymity in CBDCs, a defining feature of the currency. However, Deputy Governor Sankar emphasized that decisions regarding anonymity must be legally supported and consistent with the Prevention of Money Laundering Act (PMLA).
