India to launch CBDC using a tiered approach: RBI Annual Report
Building on India’s decision to introduce an internal central bank digital currency (CBDC) in 2022-23, the Reserve Bank of India (RBI) has proposed a three-step tiered approach to introducing digital central bank currencies “with little or no disruption” to the traditional financial system.
In February, while discussing the 2022 budget, India’s Finance Minister Nirmala Sitharaman spoke of launching the digital rupee to provide a “huge boost” for the digital economy. In the annual report released by the Central Bank of India on Friday, the Reserve Bank of India (RBI) revealed the pros and cons of introducing a central bank digital currency.
In the report, the Reserve Bank of India stressed the need for India’s central bank digital currency to align with India’s goals of “monetary policy, financial stability, efficient currency operations and payment systems.”
Based on this need, RBI is currently examining various design elements of CBD that can coexist within the existing monetary system without causing disruption. The Indian Finance Act 2022, which imposed the introduction of a 30% crypto tax on unrealized winnings, provides a legal framework for the launch of the digital rupee:
“The Reserve Bank proposes adopting a tiered approach to the introduction of commercial bank digital currency, moving step by step through the proof-of-concept, beta and launch phases.”
Halfway through 2022, in the proof-of-concept stage, RBI is in the process of validating the feasibility and functionality of the CBDC launch.
Related: The Reserve Bank of India (RBI) warns against crypto “dollarization” of the Indian economy
Earlier this month, on May 17, officials from the Reserve Bank of India reportedly warned against adopting cryptocurrencies, citing the risks of “dollarization” of the Indian economy.
As Cointelegraph reported, based on the Economic Times findings, key officials of the Reserve Bank of India, including Governor Shaktikanta Das, have raised concerns about the US dollar-dominated cryptocurrency world. An unnamed official stated:
“Almost all cryptocurrencies are denominated in dollars and issued by foreign private entities, which could eventually lead to the dollarization of a portion of our economy that would be against the country’s sovereign interest.”
“He. She [crypto] It will seriously undermine the ability of the Reserve Bank of India to determine monetary policy and regulate the country’s monetary system.”