Reserve Bank of India (RBI) Governor Shaktikanta Das has consistently been vocal against the pitfalls of cryptocurrency and the stance appeared to remain unchanged at the Mint BFSI Summit on Thursday. During his event, Das detailed RBI’s ongoing plans on central bank digital currencies (CBDCs), or e-Rupee, which the central bank regulator introduced in late 2022. Das also expressed concerns about the potential risks associated with delving into the crypto space, stating that embarking on such a path could pose substantial threats. He emphasised that a crypto mania akin to the historical Tulip mania could have severe repercussions for the world and emerging markets.
“I don’t think the world or emerging markets can take a crypto mania like the Tulip mania,” Das asserted.
For those unaware, Tulip mania refers to a period during the 17th-century Dutch golden age, when contract prices for tulip bulbs (considered quite fashionable and a ‘hot property’ at the time) touched exorbitantly high levels. While the trend began in 1634, it all ended abruptly in 1637, when buyers refused to pay inflated prices for the flower bulbs, effectively bursting the bubble.
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Das mentioned RBI’s initial focus on the government securities segment in the wholesale sector for CBDCs, with plans to expand into money market operations. The governor described the ongoing efforts to incorporate CBDC utilisation in the money market, emphasising the cautious approach due to the creation of a new currency system. Das stressed the need for meticulous attention to ensure the integrity and safety of the currency.
“It’s a pilot project. We are in no great hurry,” Das said. “After all, we are creating a new currency system. We have to be very careful about the integrity and safety of the currency that we are creating.”
Das added that there is no specific “target date” of complete CBDC implementation as of yet.
He also added that the RBI is also looking at “possibilities of programmability in CBDCs.” The body is contemplating ways to programme CBDC transfers, ensuring funds are used for specific purposes, aligning with the sender’s (such as the governmemt’s) defined criteria.
Additionally, Das noted the interoperability between UPI and CBDC, enabling the use of the same QR code for both UPI payment systems and CBDC wallets.
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While several countries are in pilot mode, the exact timeline for the implementation of CBDC remains uncertain. Governor Das expressed optimism about CBDC being the future currency system, particularly in streamlining cross-border payments for enhanced speed, efficiency, and cost-effectiveness. The use of blockchain and the Distributed Ledger Technology (DLT) method is being employed in these endeavours.
Addressing the broader technology landscape, Das acknowledged the merits of blockchain technology, highlighting its widespread adoption in various sectors in India, such as logistics and land records maintenance. He emphasised that blockchain technology holds immense potential independently of cryptocurrencies.
Furthermore, Das commended private companies for their pivotal roles in establishing India as a global leader in the UPI payment system. He praised the widespread acceptance of digital lending guidelines and emphasised the importance of sustainable growth in the fintech sector. In response to the surge in fraudulent lending apps, the governor assured collaboration with the government and relevant ministries to implement appropriate measures against suspicious applications.