The Reserve Bank of India (RBI) is reportedly exploring the “feasibility” and “desirability” of issuing an Indian Rupee-backed (INR) central bank digital currency (CBDC). RBI’s annual report noted that using a CBDC for banking transactions could reduce the “costs of managing fiat/paper metallic money.”
India’s central financial institution confirmed several reports from local news outlets that it had been closely monitoring the “rapid changes” in the world’s financial industry. The RBI also said it had created an “inter-departmental group” that is tasked with “studying and providing guidance” on whether a CBDC would be beneficial.
“Exploring Option Of Fiat Digital Currencies”
In its extensive 268-page annual report, the RBI mentioned that the rising costs of printing physical money “have led central banks around the world to explore the option of introducing fiat digital currencies.” According to statistics reported by India’s Economic Times, the cost of printing currency notes in India was approximately INR 6.3 billion ($89 million) in 2018.
While the RBI has not yet stated that it will be using distributed ledger technology (DLT) to develop its own digital currency, there’s likely a good chance that it will be exploring and working on creating a blockchain-based CBDC – as several officials from India’s government have acknowledged the potential benefits of blockchain technology.
In early February, India’s finance minister Arun Jaitley said:
“The government will explore use of blockchain technology proactively for ushering in the digital economy.”
Moreover, the RBI noted in its annual report that utilizing DLT for banking transactions “holds the promise of significant economic benefits in [the] future.”
Cryptocurrency Transactions Still Not Authorized
Notably, the RBI instructed all local financial institutions in April to stop offering banking services to individuals or businesses dealing in cryptocurrencies. Despite attempting to restrict India’s crypto economy, it now appears that India’s central bank does think blockchain-based or digital currencies may have potential benefits.
The RBI’s current restrictive measures against cryptocurrencies may be due to the large number of scams associated with them. As CryptoGlobe reported, Asia’s head of Bitconnect, Divyesh Darji, was recently arrested in India. Darji has been charged with extorting large amounts of bitcoin from various investors and promoting Bitconnect’s Ponzi scheme – now considered to be the largest scam in the crypto industry’s history.
Also as CryptoGlobe reported last week, five other alleged scammers were arrested in India after local authorities found that they had lured around 1,200 investors into investing over $1.4 million in a fraudulent crypto-based multi-level marketing (MLM) scheme.