As we all know that cryptocurrency is covering a big amount of exchange market, so even with speculations in the market; investors still intend to buy such digital currencies. Where Central Bank’s digital currency had come in picture and the Deputy Governor of Reserve Bank of India had mentioned in his speech that they are putting efforts for checking the viability of Central Bank Digital Currency (CBDC) and its application as well. As they are aware of the fact that virtual currencies are both present and future need of the hour.
Looking at the present and the past scenario of cryptocurrency in Indian context, one can evaluate its future upholdings.
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Bill Concerning Cryptocurrency
The issues concerning virtual currency and the actions to be taken were studied by a higher level inter ministerial committee in 2017. The risks linked with decentralised virtual currency as loss of regulation, value fluctuations risk, risk based on technology, illegal and criminal use ( as money laundering) cause of stress on certain country’s energy resource and all this was reported by the committee in 2019. Even the committee report had proposed CBDC and also the activities being criminalised which were enclosed by cryptocurrencies (private). Currently Cryptocurrency and the Regulation of the Official Digital Currency Bill, 2021 is still on the row to be presented in parliament.
Where government has always recommended a digital currency which is recognised, issued and regulated by sovereign in India. Therefore, CBDC should be that form of digital currency which is legally approved by central government and also issued by RBI. This is so cause then it would be considered safe, efficient and assumed to be holding a constant value than any private cryptocurrency which fluctuates.
RBI Act, 1934
This Act of RBI is required to develop in future as currency being legal tender in India has evolved only in its physical form through bank notes, drafts, coins, cheques, etc. and so the Act is not ready in handling the virtual currency entirely. For example, RBI Act is having provisions as sections 22, 24, 25 and 26 which show liability of RBI’s authority for issuing bank notes and prescribing their specifications too in such a concern. At current state, such provisions are badly equipped for handling CBDC regulations.
Department of Issue
As it is clear by the name that issue department of RBI is held responsible for issuing bank notes and Section 33 of the Act is having in detail provision of what all assets it could hold. It is so clear that RBI is still exploring that is CBDC being used in wholesale, retail or whether in both areas. But there would be some thinking on implications of CBDC in concern with obligations of decided banks so as to maintain cash reserves with RBI.
Therefore in above mentioned cases the only thing which matters is the stability of CBDC VALUE , otherwise such provisions would get hindered. However, it is essential to notice that the undue fluctuations affect on such provisions should be involved in the Act.
So as the energy inefficient digital currencies have been uptill now; RBI would have to look the practical side of it as the infrastructure needed for regulation, managing and holding CBDC. In case private party infrastructure is utilised by way of tenders then they would be at their own risk.
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