CBDC: RBI proposes ‘graded approach’ for its alternative to cryptocurrency

The RBI released its annual report in which it said that the pros and cons of the government’s own digital currency were being looked at. 

The Reserve Bank of India (RBI) on Friday said that it was proposing to adopt a graded approach for the launch of central bank digital currency (CBDC), the much-talked-about alternative to cryptocurrency announced by Union finance minister Nirmala Sitharaman while presenting the Budget 2022-23.

In its annual report released earlier in the day, the RBI said it was looking at the pros and cons of introduction of CBDC in India, taking gradual steps through stages of proof of concept, pilots and the launch. It was working to see if the idea can be turned into a reality and function as envisioned.

The proposal aimed to ensure conformity with the objectives of the monetary policy, financial stability and efficient operations of currency and payment systems.

“The Reserve Bank is engaged in the introduction of a central bank digital currency (CBDC) in India. The design of CBDC needs to be in conformity with the stated objectives of monetary policy, financial stability and efficient operations of currency and payment systems,” the RBI said in its report.

“The Reserve Bank proposes to adopt a graded approach to introduction of CBDC, going step by step through stages of Proof of Concept12, pilots and the launch,” it added.

Introduction of the digital currency was announced in the Union Budget earlier this year with an amendment to the RBI Act, 1934, included in the Finance Bill, 2022.

The Finance Bill, 2022 had been enacted, providing a legal framework for the launch of CBDC, the currency regulator said.

(With agency inputs)

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