Reserve Bank of India sees Potential in CBDC says its Mixed Blessing
March 3, 2021 4:38 AM
Reserve Bank of India (RBI) in it's report on currency and finance for the year 2020 to 2021 has described central bank digital currencies as a mixed bag.
The India central bank has realized the potential benefits of central bank digital currencies (CBDC) but not without including a few surprises.
In it's latest report issued on Sunday, India Central Bank delivered its review of CBDC's in it's currency and finance report.
The Reserve Bank of India report states that, CBDCs can help to promote financial inclusion and transactional clarity. RBI also stated that the proposed national digital currencies could be instrumental for monetary transmission by encouraging public consumption toward specific types of products and services.
On clarifying CBDC benefits, the Reserve Bank of India also noted that digital equivalents to fiat currency could aid central banks to pump "helicopter money."
However, in the report RBI reported that several countries are also exploring the creation of their own Central Bank Digital Currency or CBDC's.
In it's statement, the central bank acknowledged a few doubts regarding the likely negative impacts of CBDC's on the currency financial system.
“central bank digital currency is, however, not an unmixed blessing. it poses a risk of disintermediation of the banking system, more so if the commercial banking system is perceived to be fragile.”
Nonetheless, the RBI report did not contain any details about the central bank’s digital rupee project. In another portion of the document, the central bank did admit that the internationalization of rupee was essential making unavoidable, but also the Central bank expanded saying such a move would mix up monetary policy formulation and execution.
At the moment several countries are looking at the options to create their own CBDC, interoperability is becoming a concern among stakeholders.