{"id":128955,"date":"2021-08-26T20:38:31","date_gmt":"2021-08-26T15:08:31","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=128955"},"modified":"2021-08-26T20:38:31","modified_gmt":"2021-08-26T15:08:31","slug":"inside-the-rbis-digital-currency-dream-on-cbdc","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/inside-the-rbis-digital-currency-dream-on-cbdc\/","title":{"rendered":"Inside the RBI&#8217;s digital currency dream (On CBDC)"},"content":{"rendered":"<p><span data-contrast=\"auto\"><strong>Source<\/strong>:\u00a0<\/span><span style=\"color: #0000ff;\"><a style=\"color: #0000ff;\" href=\"https:\/\/epaper.livemint.com\/Home\/ShareArticle?OrgId=26833afcf59&amp;imageview=0\">Live Mint<\/a>\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\"><strong>Relevance<\/strong>:\u00a0Future of Central bank digital currency<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"auto\">Synopsis<\/span><\/b><span data-contrast=\"auto\">: CBDC is likely to be in the arsenal of every central bank going forward. Factors behind sudden global interest of CBDC, its need and associated challenges.<\/span><\/p>\n<h5><b><span data-contrast=\"auto\">Context<\/span><\/b><\/h5>\n<p><span data-contrast=\"auto\">RBI may come out with a model for the implementation of a government-backed digital currency by the end of this year.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<table style=\"height: 28px; width: 100%; border-collapse: collapse; background-color: #f7f2f2;\">\n<tbody>\n<tr style=\"height: 28px;\">\n<td style=\"width: 100%; height: 28px;\"><strong>Must Read<\/strong>: <span style=\"color: #0000ff;\"><strong><a style=\"color: #0000ff;\" href=\"https:\/\/forumias.com\/blog\/everything-you-want-to-know-about-cbdc\/\" target=\"_blank\" rel=\"noopener\">What is a CBDC?<\/a><\/strong><\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h5><strong>Why a sudden global interest in CBDC\u2019s?<\/strong><\/h5>\n<p>Globally, there are two factors behind this sudden interest in CBDCs.<\/p>\n<ol>\n<li>First is the rise of cryptocurrencies such as bitcoin, and<\/li>\n<li>Second, the proposed launch of a Facebook-backed digital <strong>stablecoin<\/strong>\u00a0called\u00a0<strong>Diem\u00a0<\/strong>(formerly known as Libra).\n<ul>\n<li><strong>A stablecoin <\/strong>is a digital currency that is\u00a0<strong>linked to an underlying asset<\/strong>, such as a national currency like the US dollar or a precious metal like gold. For example,\u00a0<strong>Tether<\/strong>, the largest stablecoin, is backed by the US dollar on a 1:1 basis.<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n<p>Also,\u00a0there\u00a0is<strong> intense competition between central authorities and private players<\/strong> who are simultaneously attempting to bring in greater efficiency to payments.\u00a0Central banks certainly don\u2019t want to end up on the losing side.<\/p>\n<table style=\"width: 100%; border-collapse: collapse; background-color: #f7f2f2;\">\n<tbody>\n<tr>\n<td style=\"width: 100%;\"><strong>Must Read:<\/strong> <span style=\"color: #0000ff;\"><a style=\"color: #0000ff;\" href=\"https:\/\/forumias.com\/blog\/private-partners-could-help-rbi-run-a-digital-currency\/\" target=\"_blank\" rel=\"noopener\"><strong>Private partners could help RBI run a digital currency<\/strong><\/a><\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h5><strong style=\"font-family: var(--heading--font-family); font-size: var(--heading--font-size-h5); letter-spacing: var(--heading--letter-spacing-h5); background-color: var(--global--color-background); color: var(--global--color-primary);\">Need for CBDC<\/strong><span style=\"font-family: var(--heading--font-family); font-size: var(--heading--font-size-h5); font-weight: var(--heading--font-weight-strong); letter-spacing: var(--heading--letter-spacing-h5); background-color: var(--global--color-background); color: var(--global--color-primary);\">\u00a0<\/span><\/h5>\n<ol>\n<li>Much effective than\u00a0traditional\u00a0financial\u00a0system\u00a0to effectively handle cross-border trade and movement.<\/li>\n<li>Existing\u00a0<a href=\"https:\/\/forumias.com\/blog\/7-banks-fined-for-delayed-swift-implementation-2\/\"><strong>SWIFT<\/strong><\/a>\u00a0system\u00a0of (international) money transfer ensures that the US has a disproportionate control of the (current) global settlement\u00a0process.\u00a0CBDC can ensure a level playing field.<\/li>\n<li>Enables Faster\u00a0money\u00a0transfer at low\u00a0cost.<\/li>\n<li>Reduction in the compliance burden<\/li>\n<li>CBDC\u2019s are necessary to protect the public in an environment of volatile private virtual currencies<\/li>\n<li>Will help\u00a0India\u00a0to\u00a0slowly move towards a cashless economy<\/li>\n<\/ol>\n<h5><strong>CBDCs role in welfare schemes<\/strong><\/h5>\n<p>Over the years, one major shortcoming of traditional money has been in the area of delivering welfare schemes.<\/p>\n<p>In India, the DBT program is currently in place to enable the transfer of subsidies directly to a person\u2019s bank accounts.<\/p>\n<ul>\n<li>However, sending money via traditional banking channels is <strong>costly,<\/strong> as banks have to adhere to KYC and anti-money laundering requirements.<\/li>\n<li>Since CBDCs are programmable money and can be embedded with a computer code, a digital rupee can hold KYC information within itself.<\/li>\n<\/ul>\n<p>Therefore, a central bank-issued digital currency can ultimately l<strong>ower the cost incurred<\/strong> by banks.<\/p>\n<table style=\"width: 100%; border-collapse: collapse; background-color: #f7f2f2;\">\n<tbody>\n<tr>\n<td style=\"width: 100%;\"><strong>Must Read:<\/strong> <span style=\"color: #0000ff;\"><strong><a style=\"color: #0000ff;\" href=\"https:\/\/forumias.com\/blog\/the-merits-of-an-rbi-digital-currency-outweigh-risks\/\" target=\"_blank\" rel=\"noopener\">Merits of an RBI currency outweigh the risks<\/a><\/strong><\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong style=\"font-family: var(--heading--font-family); font-size: var(--heading--font-size-h5); letter-spacing: var(--heading--letter-spacing-h5); background-color: var(--global--color-background); color: var(--global--color-primary);\">The challenges<\/strong><span style=\"font-family: var(--heading--font-family); font-size: var(--heading--font-size-h5); font-weight: var(--heading--font-weight-strong); letter-spacing: var(--heading--letter-spacing-h5); background-color: var(--global--color-background); color: var(--global--color-primary);\">\u00a0<\/span><\/p>\n<ol>\n<li><strong>Operational challenges<\/strong>: The\u00a0RBI will need to\u00a0decide\u00a0about\n<ul>\n<li>the degree of anonymity when transacting via CBDC.<\/li>\n<li>whether CBDC can be utilized for both retail payments (peer to peer) or will it be limited to wholesale payments (among banks and financial institutions for the settlement of transactions);<\/li>\n<li>whether CBDC units will be interest bearing<\/li>\n<\/ul>\n<\/li>\n<li><strong>Privacy concerns<\/strong>: Centralized ownership would make all money traceable by the government.<\/li>\n<li><strong>Managing Future risks<\/strong>:\u00a0Governance and control structures will need to be updated to manage the unique risks which will arise with CBDC.<\/li>\n<li><strong>Legal challenges:<\/strong>\u00a0Several amendments to existing banking norms will be required to enable a digital currency (as opposed to paper currency).<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"<p>Source:\u00a0Live Mint\u00a0 Relevance:\u00a0Future of Central bank digital currency\u00a0 Synopsis: CBDC is likely to be in the arsenal of every central bank going forward. Factors behind sudden global interest of CBDC, its need and associated challenges. Context RBI may come out with a model for the implementation of a government-backed digital currency by the end of&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/inside-the-rbis-digital-currency-dream-on-cbdc\/\">Continue reading <span class=\"screen-reader-text\">Inside the RBI&#8217;s digital currency dream (On CBDC)<\/span><\/a><\/p>\n","protected":false},"author":10328,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[216],"class_list":["post-128955","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704887439},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/128955","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10328"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=128955"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/128955\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=128955"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=128955"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=128955"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}