Regulation: digital currency in India is on the rise

Anti-dollarization – India’s central bank confirms intention to launch digital currency with a new announcement outlining its methodology for this project.

Step by step towards an unobtrusive digital rupee

India’s central bank has noted in its annual report published on 27 May 2022that “proposes to adopt a step-by-step approach for the introduction” of the digital Indian rupee.

Recent developments going through three stages :

  • proof of concept,
  • pilot project,
  • project launch.

This digital rupee design should further according to the central bank:

“consistent with the objectives of monetary policy, financial stability, and efficient operation of money and payment systems”

The Reserve Bank of India is currently reviewing the “appropriate design elements” of the digital currency. They “can be implemented with little or no disruption”.

In other words, the institution wants to determine the right method for issuing digital currency. Results? Coexist with the current fiat currency system, without disturbing him.

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Early but legal: digital rupee against dollarization

India’s central bank is currently still in the proof-of-concept stage. It is therefore studying the possible functionality of this digital rupee, and the feasibility of such a project.

However, the launch of India’s digital currency is already profitable from the legal framework :

“The introduction of the CBDC was announced in the 2022-23 Union Budget. The corresponding amendments to the 1934 RBI Act have been included in the 2022 Finance Bill. The 2022 Finance Bill has been enacted, providing the legal framework for the launch of the CBDC. »

This digital rupee should be fighting increasing adoption of cryptocurrencies in India. Indeed, these consequences should be dangerous for the country’s monetary system. RBI officials are said to be very concerned about dollarization of the economy because of cryptocurrencies.

“Almost all cryptocurrencies are denominated in dollars and issued by foreign private entities. This could eventually lead to the dollarization of parts of our economy, which would be against the sovereign interests of the country. »

An Indian official spoke anonymously

Therefore, the central bank decided to issue MNBC, respond to the Bank’s call for International Settlement. So, there is no need to rush to launch the digital currency. India wants to avoid disruption of its current monetary system.

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Serena Hoyles

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