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‘Too Early’ for Central Bank Digital Currency: India Shelves Plans for a Crypto Rupee

Last Updated October 5, 2020 5:37 PM
Mark Emem
Last Updated October 5, 2020 5:37 PM

Plans to issue a state-backed cryptocurrency in India have stalled, months after the country’s central bank gave indications that it was considering the idea.

According  to The Hindu Business Line, the government is no longer interested in the state-backed digital rupee. Citing a source, the report by the publication indicated that the idea of a crypto-rupee was dropped on the grounds that it was premature:

The government doesn’t want the digital currency any more. It thinks it is too early to even think about a digital currency.

‘Wise Decision’

The move to postpone plans for a crypto rupee was supported by some of the leading lights in India’s cryptocurrency space. This included Kunal Nadwani, a blockchain expert and the chief executive of uTrade Solutions, who hailed the decision arguing that the ‘economic effects of crypto are sizeable and largely unknown’.

Also in agreement was Praveen Kumar, the founder of Belfrics, a cryptocurrency exchange whose presence is concentrated in Asia and Africa, who said that India’s government should allow smaller advanced nations such as Singapore and the United Arab Emirates to experiment before dabbling in a crypto-rupee:

It is premature for RBI (Reserve Bank of India) to launch crypto-rupee, as more understanding of the crypto economy need to be achieved. It is a right decision to delay the process and see how the publicly traded peer-to-peer economy is shaping up.

Central Bank Digital Currency

This comes nearly five months since it was reported that the Reserve Bank of India (RBI) was looking into the possibility of launching a Central Bank Digital Currency (CBDC). In an annual report that was released last year in August, the RBI indicated that the main purpose of the CBDC would be facilitating domestic payments.

Additionally, India’s central bank indicated that a CBDC would be useful in stemming the increasing costs of managing physical cash as well as checking money laundering. The task of exploring the plausibility of a CBDC was assigned to an inter-department group appointed by the RBI, as CCN.com reported at the time:

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 (CBDC).

A year earlier, a whitepaper which had been published by the research arm of the RBI, the Institute for Development & Research in Banking Technology, had determined that blockchain technology had matured enough to support a central bank digital currency. The CBDC was apparently going to be named in honor of the Hindu goddess of wealth and prosperity, Lakshmi.

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