Even though the current volume of CBDC (central bank digital currency) transactions is not very high, the infrastructure has potentially game-changing use cases in the future, said Reserve Bank of India Deputy Governor T Rabi Sankar.
“There are potentially game changing choices available, particularly in the area of cross-border transactions. There is a huge amount of inefficiences in this process that the CBDC can take care of,” Sankar said at a conference organised by Indian Banks’ Association on Saturday.
The initial pilots are currently focused on ensuring that the systems are working, and will help in identifying the right technology and architecture for distribution of the digital currency, he said, adding these basic infrastructural issues will be addressed by the RBI going ahead.
“Many other use cases we’ll try out. The process is on, probably next step would be trying out CBDC using blockchain. These pilots are mostly looking at various technologies and finding out what is best. So we’ll try other technologies, and other use cases as well, including other money markets,“ Sankar said.
Creating infra
He added that the RBI’s role is to create the infrastructure and provide a choice to the people, which can then be used and built upon by industry players, including private sector players. “We can have smart contracts, bonds tokenised, and many other possibilities following from here,” he said, adding that benefits can also emerge in terms of settlement efficiency.
Sankar said that so far the central bank’s CBDC experience in terms of systems has been comforting, but how it will impact the the banking system and the pace of public adoption is something that will need to be seen.
Sankar said that the need for the digital currency emerged in an environment where private companies were evolving, which posed a threat to investors, systems, and the economy. However, private currencies also showed that digitalising currency can have possible benefits.
“The way to deal with it was to provide a digital currency. If there is anything that a private cryptocurrency can do, we should be able to create the product which will do that without the associated risks in a safer format,” he said.