Like most other countries, India is also working on its Central Bank Digital Currency. It’s expected to launch in the country in 2022-23, and RBI has already started to work on how the rollout will happen. It says that India will use a graded approach as it plans to roll out its CBDCs. And as a result, there will be little to no disruption to the traditional financial system of the country.
India’s approach to Central Bank Digital Currencies
While India has been very strict regarding cryptocurrencies, the RBI and the country’s finance minister have been equally determined to launch their own CBDC. The Central Bank Digital Currency will be a digital rupee and boost the digital revolution in India. A recent report released by the Central Bank of India talked about the advantages and disadvantages of launching a CBDC. Most importantly, RBI wants to ensure that releasing a CBDC will not hinder its objectives of financial stability and current payment and currency systems.
To ensure that things go smoothly, RBI would follow a graded approach. There will be 3 main steps to this. First is the proof of concept, the second is the pilot, and finally, the launch. The Reserve Bank of India is currently in the process of verifying how practical and functional it is to launch a CBDC in the first step.
The problem with CBDCs
A CBDC has two significant security vulnerabilities. Firstly, individual accounts might be hacked due to flaws in cyber security. Secondly, as a crucial piece of national infrastructure, the centralized CBDC ledger might be a target for hostile state and non-state actors. While no design can ensure 100% security, any CBDC system must be flexible to growing security concerns and technological progress, such as rapidly evolving quantum computing.
More importantly, for a country like India, where we have UPI, one of the best payment infrastructures globally, there is hardly any need for any other payment medium. Even those who want crypto to be widely adopted in India see it as an investment rather than a payment method.
India’s approach with CBDCs is fine, but do we really need it? That’s the main question. What are your thoughts as India plans to roll out CBDCs with a graded approach in 2022-23? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.