Crypto giants on concept note for RBI’s CBDCs and the future of digital assets in India <br><br>

cbdc in india

Crypto giants on concept note for RBI’s CBDCs and the future of digital assets in India

A few days ago, the Reserve bank of India released a Concept Note for Central Bank Digital Currencies, the Concept Note pointed out “The rapid mushrooming of private cryptocurrencies in the last few years and has attempted to challenge the fundamental notion of money as we know it.”  Many crypto companies in India called the RBI’s comparison of virtual digital assets with CBDC as flawed, “as comparing apples with oranges”.

The note claimed that “CBDCs will provide the public with the benefits of virtual currencies while ensuring consumer protection by avoiding the damaging social and economic consequences of private virtual currencies.” 

Cryptocurrencies run on distributed-ledger technology, meaning that multiple devices all over the world, not one central hub, are constantly verifying the accuracy of the transaction. But this is different from a central bank issuing a digital currency.

Anuj Ranjan, GM of RBI Fintech was one of the panelists in the discussion of the concept of CBDC at the Global FinTech Festival 2021. He exclaimed that CBDC would become a necessity due to the booming ecosystem of cryptocurrency or private virtual currency.  So, it becomes significant to develop our own CBDC, to provide the public with the advantages and uses of any private virtual currency.

Whereas many crypto market experts believe that the Central bank’s digital currencies will not be able to meet the very preposition served by privately owned digital currencies. Some pointed out that the regulators are viewing the currencies from a filter of constrained, out-of-date, and conservative perspectives.

After the release of the Concept Note, Anuj Ranjan cleared out the stance of the Reserve bank of India and claimed that “Currencies should be only issued by the sovereign and not by any private establishments,” in a one-on-one interaction with Peak Blockchain.

Khaleelulla Baig, CEO of Koinbasket told one of the leading Indian newspapers that “ I guess this defensive approach in itself is a sign of resistance rather than coexistence, Globally, the pretext and premise of CBDCs are born out of a thought process to defend the fiat currency monopoly. I see money will continue to move and coexist in the form of fiat and crypto like the way messages move and coexist in the form of SMS text and WhatsApp today.”

“It is the responsibility of the central bank to provide its citizens with a risk-free central bank digital money which will provide the users with the same experience of dealing in currency in digital form, without any risks associated with private cryptocurrencies,” the concept note mentions.

According to many blockchain specialists, the Central Bank’s digital fiat supremacy over private tokens is unjustifiable. CBDCs only target a minor part of the larger spectrum covered by the private tokens. Currencies are one of the components of creating a future-ready blockchain infrastructure, however, CBDCs cut off the very idea of decentralization that cryptocurrency put forth. 

Nishant Gupta, blockchain consultant at Peak Blockchain suggested, “Today, virtual currencies carry more prepositions than serving as a mode of payment only. CBDCs have limitations, which make them incomparable to most virtual currencies as they lack the concept of building an ecosystem around them which is vital for the new innovative solutions. Introducing CBDCs’ to the economy will significantly boost the country’s payment system and cross-border payments, however, they won’t be able to harness the true potential of Web 3.0. It will be pegged to the country’s native currency only, protecting users from price volatility.”

He further said, “As CBDCs are interest-free, only enterprises will be able to trade in the long term, more rapidly, and affordably. The regulator will keep an eye on the significant transactions, which they are free to scrutinize at any time,” says Nishant Gupta, blockchain consultant at Peak Blockchain.

“Is CBDC another Bitcoin? The central bank is comparing apples to oranges. Cryptos are tokens. CBDC is a digital currency. Are we comparing stocks to INR? I didn’t realize the only objective of CBDC was to substitute virtual digital assets,” the chief executive of a leading crypto exchange said on condition of anonymity, as published in a report by one of the leading Indian newspapers.

A few experts in the field also appreciated the initiative taken by the RBI, as the Concept Note explains, “The purpose behind the issue of this Concept Note is to create awareness about CBDCs in general and the planned features of the digital Rupee, in particular.”

Chief operating officer of a multi-token reward staking protocol UniFarm, Tarusha Mittal said, “The RBI concept note on CBDC takes a very nuanced approach towards the implementation of CBDCs within the Indian financial ecosystem and it carefully projects positive use cases of digital currency in making India a truly digital economy.”

Some crypto companies’ CEOs have commented that the launch of CBDC will be a good start for the country to get its roots early on into the new technology with the help of an existing digital ecosystem foundation. Although various others believe that digital fiat cannot replace cryptocurrencies, regulators can be more accommodating of private digital assets.

At present, 19 G20 nations have already launched and are investing in CBDCs, moreover, 16 other countries are in the planning or pilot stage. 19 of the G20 countries are exploring a CBDC, with 16 already in the development or pilot stage. This includes South Korea, Japan, India, and Russia. Each has made significant progress over the past six months, According to the key finding of the Atlantic Council of CBDC’s tracker.

As per the Atlantic Council’s CBDC tracker’s key findings, 105 countries, representing over 95 percent of global GDP, are exploring a CBDC. In May 2020, only 35 countries were considering a CBDC. A new high of 50 countries is in an advanced phase of exploration (development, pilot, or launch).

CEO, BuyUcoin, Shivam Thakral said, “It is important to address the offline functionality of CBDC in India to enable mass adoption and create a future-ready blockchain infrastructure to facilitate CBDC-based transactions across the country.” 

Anuj Ranjan confirmed that India e-Rupee, CBDC will complement and strengthen the current payment infrastructure and system. It will not compete with cash or the existing currency distribution.

The government had planned earlier to impose a complete ban on digital currencies. However, the authorities eventually dropped the idea of banning or regulating crypto assets, but amended the RBI act of 1934, to introduce a CBDC.