The Reserve Bank of India (RBI) will explore launching its own rupee-backed digital fiat currency. The bank maintains its interest in creating a central bank digital currency while affirming its regulatory stance against cryptocurrencies.
In its newly released 2017-2018 annual report, the central bank notes that the rise of digital assets and the rising costs of managing paper money make digital assets appealing solutions. The report also outlines its position against cryptocurrency, citing Bitcoin and market volatility, exchange hacks, criminal activity and lack of dispute resolution frameworks as key concerns.
The report refers to cryptocurrencies, which are decentralized digital assets that are used to transfer value from peer to peer without third parties, banks or other intermediaries, as “privately issued” currencies that need to be monitored in order to curb off-shoring and taxation avoidance.
The Reserve Bank has established an official digital asset research group.
According to the report,
“Unlike the concerns on privately issued cryptocurrency, the adoption of DLT in the domain of payment, clearing and settlement solutions holds the promise of significant economic benefits in future. Rapid changes in the landscape of the payments industry, along with factors such as emergence of private digital tokens and the rising costs of managing fiat paper/metallic money, have led central banks around the world to explore the option of introducing fiat digital currencies. In India, an inter-departmental group has been constituted by the Reserve Bank to study and provide guidance on the desirability and feasibility to introduce a central bank digital currency.”
In April, the Reserve Bank barred its regulated entities from dealing with any crypto-related businesses or investors. It crippled the country’s crypto exchanges which dragged RBI to court. Several exchanges joined the petition as their business dwindled from a high of 100,000 new investors each month in November 2017 to a low of a few thousand.
The final hearing date is set for September 11.