In a huge development for digital/virtual currencies globally, the first-ever trials for digital rupee in India may be launched by December 2021, Reserve Bank of India (RBI) Governor Shaktikanta Das was reported as saying on August 27.
Notably, central banks around the world are exploring digital currencies. For example, central banks in China, Europe, and the UK are exploring digital currencies that would be issued by them, either to commercial lenders or to the public directly.
Central banks across the world have stepped up their efforts looking into digital currencies over the past year following a decline in cash usage and growing interest in cryptocurrencies like bitcoin, ethereum.
Also referred to as central bank digital currencies (CBDC), the digital currency is proposed to be a legal tender in online form. In other words, the digital rupee will be the online version of the fiat currency that is in circulation.
“We are being extremely careful about it because it’s completely a new product, not just for RBI, but globally,” Das told CNBC’s Tanvir Gill in a pre-recorded interview on Thursday.
The RBI is studying various aspects of a digital currency including its security, impact on India’s financial sector as well as how it would affect monetary policy and currency in circulation, according to the governor.
“I think by the end of the year, we should be able to — we would be in a position, perhaps — to start our first trials,” Das told CNBC.
Das also highlighted that the RBI is examining the option of using a centralized ledger for the digital currency or the so-called distributed ledger technology (DLT).
The DLT, on which a majority of cryptocurrencies are based, allows multiple participants to access, share and record transactions simultaneously. While the centralized ledge would mean that the database is owned and operated by a single entity, in this case, the RBI.
Last month, RBI Deputy Governor T. Rabi Sankar had said that the central bank is working on a phased implementation strategy for a central bank digital currency (CBDC) and examining use cases to ensure that there is little or no disruption.