The Reserve Bank of India (RBI) is reportedly looking into issuing its own central bank digital currency (CBDC), after a meeting of the Monetary Policy Committee (MPC), according to a Statement on Developmental and Regulatory Policies (PDF).
RBI has established an inter-departmental group to investigate such an option and whether it is actually feasible, with findings expected to be submitted in June 2018.
“Technological innovations, including virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system,” RBI Deputy Governor B P Kanungo told The Times Of India.
For one thing, CBDCs could help stir the rising costs of managing fiat paper/metallic money.
Other central banks are looking at this, too
RBI’s position on a centralized, pro state-issued cryptocurrency is nothing new, with other central banks mulling the same idea for quite some time now. In fact, more than 90 central banks all around the world have explored blockchain, including the Bank of England and the People’s Bank of China. Also in the news was the Bank of Canada, which published extensive research into the benefits of CBDCs.
Adding to that is an R3 researcher who predicted that wholesale CBDCs would see real-world implementation later this year.
But India has a mixed record with cryptocurrencies…
What’s strange about this story is that the same RBI has recently announced it will no longer provide services to any person or business that deals with cryptocurrencies.
In addition, India’s Finance Ministry had criticized Bitcoin (BTC) for its “lack of intrinsic value,” with several large banks in the country closing or limiting the functionality of crypto exchange accounts.
Luckily, RBI was not trying to kill the entire “crypto idea,” saying that virtual currencies have the “potential to improve the efficiency and inclusiveness of the financial system.” Nonetheless, it added they [virtual currencies] do “raise concerns of consumer protection, market integrity and money laundering, among others.”
So what do we make of it? Just like the comments from India – it’s a mixed bag. The main idea of cryptocurrencies is that they are decentralized, and we’re not sure how India could help with a centralized project.
On the other hand, a central bank-issued digital currency could also provide the proof this concept does make sense, further helping cryptocurrencies gain traction. We like to think something similar will happen and that our Bitcoin holdings will yet again grow in value. 😉