RBI working on a phased digital currency: Finance Ministry

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RBI working on a phased digital currency: Finance Ministry

The Finance Ministry stated during the Lok Sabha question hour that the Reserve Bank of India RBI is working on a strategy for the implementation of digital currency in a phased manner. BJP MLA Rakesh Singh asked the Finance Ministry if the government is proposing to start a digital currency in the country, the details of the same and whether it is a safe bet.

The Ministry of Finance stated in October that the Central Bank Digital Currency CBDC is issued by the central bank and that the government had received a proposal from the RBI in October for an amendment to the RBI Act of 1934 to broaden the scope of the definition of a bank note to include currency in digital form.

The ministry said that RBI has been examining use cases and working out a phased implementation strategy for the introduction of CBDC with little or no disruption.

The introduction of CBDC has potential benefits including reduced dependency on cash, higher seigniorage and lower transaction costs, and reduced settlement risk, it said. It would also lead to a more robust, efficient, regulated and legal tender-based payments option, as mentioned by the ministry.

The ministry said that there are also risks that need to be evaluated against the potential benefits.

The central bank of a government backed the CBDC, so it will not have the volatility associated with private cryptocurrencies, according to the government.