Central banks worldwide have captured the imagination with the creation of CBDCs or Central Bank Digital Currency. The RBI recently launched the pilot 'Digital Rsue' project and reports suggest that it may further expand the project based on the lessons learned from the current pilot. Governor Shaktikanta Das' recent statement on the adoption of the digital rupee suggests that 'digital rupee' may get a boost.
Central banks issued digital currencies are the future of money and its adoption can help save on logistics and printing costs, he said at a recent event.
I think CBDC will be a hot topic of discussion in this year's budget, said Kamlesh Nagware, head of Snapper Future Tech, a blockchain firm. He fears that Finance Minister Nirmala Sitharaman may announce measures to enable offline, cross-border payment and digital asset ecosystem for CBDCs.
The government of India has been a supporter of CBDCs. In her last budget speech, Ms Sitharaman said the digital currency would lead to a more efficient and cheaper currency management system.
CBDCs are the digital version of the official currency, backed by the central bank. Blockchain technology is frequently backed by these currency notes, as is the case with the digital rupee.
In the CBDC trial phase, 16,000 users made e-rupe transactions in one month. DayFi, an NFT-based financial services company, said the beginning is excellent and holds enormous potential for the future of e-rupee.
Experts say blockchain is likely to get impetus in the next few years, with the national strategy on blockchain being launched in December 2021 by the Ministry of Electronics and Information Technology. The report calls for the creation of a government-backed digital currency wallet for transactions in the farm sector.
In this year's budget, we expect proper allocation for blockchain and its application on Indian infrastructure like cargo, finance, digital documents etc.
Blockchain technology is known for being safe, trustworthy, and transparent, among the most well-known uses of CBDCs, which are well-known examples of blockchain technology. However, any discussion on CBDCs is incomplete without their comparison with cryptos, which are also run on the principles of blockchain.
The future of the Indian crypto market is uncertain, with the RBI Governor calling for an unconditional ban and the Finance Minister seeking an international collaboration for crypto regulation.
Crypto has no relation to CBDC. Nagware said the government will focus on the latter as an alternative. Mr Tiwari, too, speaks on similar lines and notes that CBDCs represent a significant step in the adoption of blockchain.
Both argue that the digital currency will help in more widespread adoption and mainstreaming of digital currencies in India. E-Rupee will help to create stronger regulations because the government and stakeholders could have a broad understanding of digital currency and digital assets, he said.
By 2032, the value of digital assets such as CBDCs and other blockchain-backed assets can be up to $1 trillion, a significant increase in India's economy.