Assessing the viability of an Indian Central Bank Digital Currency (CBDC)
DOI:
https://doi.org/10.55763/ippr.2022.03.03.003Abstract
A large number of Central Banks around the world are planning to introduce Central Bank Digital Currencies (CBDCs) as a legal tender in their countries. The Reserve Bank of India (RBI) has also revealed similar plans, with an Indian CBDC expected in the near future. Any evaluation of such a major change in the nature of money requires a broader understanding of the opportunities and challenges arising from the adoption of CBDCs. In this paper, we discuss these issues at the conceptual level and specifically in the Indian context. We show that the conceptual issues can be characterised in three ways – monetary sovereignty issues, issues from the point of view of national sovereignty, and developmental issues. In the Indian context, we analyse these issues from the perspective of the rapid digitalization taking place in the country. Finally, we discuss the steps that the RBI needs to take in order to introduce an Indian CBDC.
Keywords:
CBDC, Monetary Sovereignty, Disintermediation, Dollarization, Financial Inclusion, CryptocurrenciesDownloads
References
Adrian, T., Mancini-Griffoli, T. (2019). “The Rise of Digital Money”. Fintech Notes, International Monetary Fund.
Banerjee, B. (2020). “Digital Currencies and Cross-Border Policy Cooperation and Coordination”. G20 Digest.
Bank for International Settlements. (2020). “Central banks and payments in the digital era”. BIS Annual Economic Report, Bank for International Settlements.
Bank of Canada., European Central Bank., Bank of Japan., Sveriges Riksbank., Swiss National Bank., Bank of England., Board of Governors Federal Reserve System., Bank for International Settlements. (2020). “Central Bank Digital Currencies: foundational principles and core features”. Report No. 1, Bank for International Settlements.
Bank of England. (2020). “Central Bank Digital Currency: Opportunities, challenges and design”.
Barontini, C., Holden, H. (2019). “Proceeding with caution – a survey on central bank digital currency”. BIS Papers No. 101.
Boar, C., Wehrli, A. (2021). “Ready, steady, go? – Results of the third BIS survey on central bank digital currency”. BIS Papers No. 114.
Bossone. B., Natarajan, H. (2020). “Getting funds to those in need and enabling access to money during COVID-19, part 3: Central bank digital currencies and other instruments”. VoxEU.org, Center for Economic Policy Research.
Committee on Payments and Market Infrastructure., Markets Committee Papers. (2018). “Central Bank Digital Currencies”. Bank for International Settlements.
Committee on Payments and Market Infrastructures. (2016). “Fast payments – Enhancing the speed and availability of retail payments”. Bank for International Settlements
Ferrari, M.M., Mehl, A., Stracca, L. “The international dimension of a central bank digital currency”. VoxEU.Org, Center for Economic Policy Research.
Moneycontrol News. “In a position to start testing, running pilot CBDC projects: RBI Deputy Governor” Moneycontrol.com. (April 8, 2022)
Inter-ministerial Committee. (2019). “Report of the Committee to propose specific actions to be taken in relation to Virtual Currencies”. Ministry of Finance, Government of India.
Kar, S., Priyadarshini, D. (2022) “Correct design can ensure CBDCs don’t destabilise banks”., Hindustan Times. (February 14, 2022) https://www.hindustantimes.com/opinion/correct-design-can-ensure-cbdcs-don-t-destabilise-banks-101644846670390.html
Kosse, A., Mattei, I. (2022). “Gaining momentum – Results of the 2021 BIS survey on central bank digital currencies”. BIS Papers No. 125.
Ledger Insights. (2021). “ECB digital euro survey: Privacy is a dealbreaker”. Ledger Insights. (April 14, 2021)
Ma, Winston. (2021). “China’s cryptocurrency regulations will propel similar regulations globally”. International Financial Law Review. (July 28, 2021)
Mancini-Griffoli, T., Martinez Peria, M.S., Agur, I., Ari, A., Kiff, J., Popescu, A., Rochon, C. (2018). “Casting Light on Central Bank Digital Currencies”, IMF Staff Discussion Note, International Monetary Fund.
Margulis, C., Rossi, A. (2021). “Legally Speaking, is Digital Money Really Money?”. IMF Blog, International Monetary Fund. (January 14, 2021)
Marsh, Sarah. (2021) “Eastern Caribbean blazes a trail as first currency union to launch central bank digital cash”., Reuters. (April 1, 2021)
Niepelt, D. (2019). “Libra paves the way for central bank digital currency”. VoxEU.org, Center for Economic Policy Research.
Niepelt, D. (2020). “Digital money and central bank digital currency: An executive summary for policymakers”. VoxEU.org, Center for Economic Policy Research.
Nishith Desai Associates (2018). “Building a Successful Blockchain Ecosystem for India: Regulatory Approaches to Crypto-Assets”. An independent submission to the Government of India.
Payments Canada. (2021). “Central Bank Digital Currency (CBDC): Retail CBDC Global Developments”. Central Bank Digital Currencies: The Series, Vol.3
Press Trust of India. (2021). “RBI internal panel working on model of central bank's digital currency, decision very soon: Deputy Governor B P Kanungo”. Economic Times. (February 5, 2021)
Priyadarshini, D. (2021) “User-Centric Design Will Be Key to the Success of a Digital Rupee”., Carnegie Endowment for International Peace India. https://carnegieindia.org/2021/12/09/user-centric-design-will-be-key-to-success-of-digital-rupee-pub-85939
Reserve Bank of India. (2021). “Payment and Settlement Systems in India: Journey in the second decade of the Millennium 2010-20”.
Rodrik, D., (2005). “Growth strategies”. Handbook of economic growth, 1, pp.967-1014.
Saran, S. (2020). “China’s digital currency moves”. Business Standard. (May 13, 2020)
Singh, B., Kant, S. (2019). “Crypto Currencies/Blockchain and the Banking System”. The Journal of Indian Institute of Banking and Finance.
T Rabi Sankar. (2021). “Central Bank Digital Currency – Is This the Future of Money”. Reserve Bank of India. (July 22, 2021)
Wenhao, Shen. (2020). “Regulation Of Cryptocurrency in China”. Mondaq. (June 12, 2020)
