RBI working on digital currency launch, but has major concerns

Even as the Reserve Bank of India continues to have "major concerns" on the rising activity in the cryptocurrency space, it is simultaneously working on its own variant of a central bank digital currency, Governor Shaktikanta Das said in an interview to a television channel today.

"Central bank digital currency is again a work in progress," Das said. "The RBI team is working on it, both the technology side as well as the procedural side - how it will be launched, how it will be sort of rolled out. It's still work in progress. We are very much in the game. We are targeting to launch it," Das said.

He declined to hazard a guess on when the launch of such a fiat cryptocurrency would happen, as many loose ends are still being tied up. Commenting on those linking retail participation in gilts with the central bank digital currency, Das said that the two issues were completely different. This statement from Das aligns with the RBI's booklet on Payment Systems in India, released in January, that the central bank was still studying whether a digital version of fiat currency was needed.

It also takes forward comments by Deputy Governor B.P Kanungo on Feb 5 that an internal committee was taking a close look at the model of the central bank's digital currency, and the RBI will communicate its decision "very soon".

The RBI had said in the booklet that "In India, the regulators and governments have been sceptical about these currencies and are apprehensive about the associated risks".

Unlike private digital or cryptocurrencies, the RBI was referring to a central bank digital currency, which is basically a legal tender backed by the government.

Such a digital currency, if issued, will show up as a liability on the central bank's balance sheet. In such a case, electronic currency can be converted or exchanged at par with similarly-denominated cash and central bank deposits.