India has become one of the latest countries to join the march for CBDC adoption. A few months ago, there were reports about countries like Russia and Bhutan considering CBDCs and cross-border payment systems. This week, however, India has added to their number.
A report published by the FinTech department of the Reserve Bank Of India (RBI) confirmed that it has joined the CBDC crusade and is looking into both a retail CBDC for consumers and small businesses, as well as a larger version for interbank transfers and other wholesale transfers.
According to RBI, a pilot version of the "digital rupee" will launch later in 2022. The RBI has also asked at least four public banking sectors to trial this new digital rupee.
The march for CBDC adoption seems to be getting larger by the day, with 55 countries already exploring them and 50 in advanced testing phases. So far, about 11 countries have fully adopted CBDCs, while 15 (including India) are in pilot phases, set to launch at any moment.
The digitization of currency all around the world is changing the way people pay for goods and services. There are even predictions that digitized currencies will soon render physical currencies obsolete.
There are more than 6000 cryptocurrencies currently in use all over the world, with one in ten people already invested in them. The demand for digital currencies isn't a fact that central banks of the world's countries can ignore anymore.
This explains the rush and the rate of adoption of CBDCs.
For perspective, CBDCs have more in common with paper money than actual crypto and serve as a safer and more centralized version of cryptocurrencies. Governments can also control and monitor them, making them perfect for adoption.
The most popular line of action for countries after adopting CBDCs is to ban other cryptocurrencies to boost the adoption of their "digital fiat."
This is likely to severely weaken the foothold of crypto in the country and doesn't appear to have much to offer by helping decentralized cryptocurrencies.
CBDCs, although created and distributed through blockchain ecosystems, have always been met with mixed reactions.
In several other countries, members of the world of Defi kick against this centralized form of cryptocurrency, designed to represent already existing fiat (government-issued) currencies.
Other crypto community members see CBDCs as a step forward and a good way for countries to embrace blockchain technology and its benefits.
The reactions from India's stakeholders are no different.
Many of the country's industrial leaders and stakeholders see its CBDC adoption as a good thing in the interest of India's long-term future. At the same time, others have strongly kicked against the idea and have tagged it as an elaborate plot to disrupt global interest in mainstream cryptocurrencies.
Rajgopal Menon, vice president of WazirX exchange, has declared support for this new development, stating that adopting a digital rupee goes a long way to show India's love for crypto but will be less risky alternative to regular cryptos.
Niamish Sanghvi, co-founder of CoinCrunch-India, doesn't share Menon's optimism. Sanghvi has opposed this idea of a digital rupee, terming it a "play against the global interest in crypto and blockchains."
Sanghvi further says that the RBI doesn't need blockchain technology to create a digital Rupee. He also added that a digital rupee might be good but doesn't require a blockchain to run it.
However, many other stakeholders have stated that the role of these CBDCs appears unclear. One of the major points of confusion, as pointed out by Amanjot Malhotra, is whether the digital rupee will be a blockchain/distributed ledger system or simply be money on a regular centralized database.
In conclusion, the RBI has decided to forge ahead with its plans. Finance minister Nirmala Sitharaman has stated that minting for the digital rupee will start in February, during the 2023 union budget.
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