CBDC : Slow and Steady

 Context :

 

RBI's digital currency: Phased implementation in process for wholesale, retail segments 

( DNA /  20 July 2022 )

 

Extract :

The Reserve Bank of India is in the process of implementing the Central Bank Digital Currency (CBDC) in a phased manner for the wholesale and retail segments, an official said on Wednesday

 

The passage of the bill has enabled the RBI to conduct a pilot and subsequent issuance of CBDC, he said. "RBI is also working on phased implementation of a central bank digital currency (CBDC) in both wholesale and retail segment," Choudhary said while delivering a keynote address at the 'PICUP Fintech Conference & Awards' by FICCI.

 

CBDC is a digital or virtual currency but it is not comparable to the private virtual currencies or cryptocurrency that have mushroomed over the last decade. Private virtual currencies do not represent any person's debt or liabilities as there is no issuer.

 

India's official digital currency is likely to debut by early 2023, which will mirror any of the currently available private company-operated electronic wallets. The CBDC will be a sovereign-backed digital currency. 

 

Citing data, he said so far this year, India's UPI transaction has seen participation of 323 banks and has recorded 5.9 billion monthly transactions worth over USD 130 billion. 

 

The revolution which the QR code brought along and the interoperability features ensured that the banking on the fingertip phase came through, the official said. "I have also observed that most of the younger generation now avoid carrying a physical wallet as everything they need is in their mobile phones. The contribution of fintech in digital payment can also be observed by usage of prepaid payment instruments.

 

 

MY  TAKE  :

 

Crypto : Corruption : Corona : China ………………………..[ 17 June 2020 ]

 

-       Where , I wrote :

 

 

Dear Smt Nirmala Sitharamanji / Shri RaviShankar Prasadji / Shri Piyush Goyalji,

 

 

 

I have no clue as to what mechanism could be used ( Inter-Currency Exchange Rate ) for payment for Imports and remittances for Exports , if – and when – we introduce IndiaBit

 

 

But if IndiaBit can ,

 

 

 #   To begin with bring out all BLACK MONEY ( stashed away as paper currency notes ) and deploy the

 

      same into mainstream economy for productive purposes , and

 

  

#   Put a Full Stop to any future generation of Black Money ,

 

 

           -      then my proposal deserves a debate

 

 

What will convince RBI / Government to issue OFFICIAL VIRTUAL CURRENCY ?

Here is a brief ( non-comprehensive ) suggestion for proposed Law :

 

 

Ø  While banning Private Crypto, introduce IndiaBit ( Govt Virtual Currency )

 

Ø  With some effective date, withdraw all Paper Currency ( forget coins )

 

Ø  Minimum denomination will still be called a RUPEE ( easy to convert from paper to digital )

 

Ø  As of a given date, bank balances in everyone’s bank account gets converted to IndiaBits

 

Ø  Set time limit within which people can deposit their paper currency into banks for instant conversion

    into IndiaBits

 

Ø  After set date, paper currencies held by anyone ( individual or any legal entity such as a Company ),

    loses all value and become illegal for any sell / purchase transaction

 

Ø  All future financial transactions ( sell / buy of any goods or services ) can only be through mobile-app

    based DIGITAL transactions

 

Ø  Since all transactions will become DIGITAL, Govt would have full / life-time LOG of each citizen’s “ Sale

    or Purchase “ [ Who bought What , When , from Whom , at What price , Where etc ] .

====================================================================

 

Dear Smt Sitharamanji,

 

A word of caution :

 

Implementation of my suggestion ( described above ), is bound to meet with strong resistance / opposition from persons holding BLACK MONEY ( stashed paper currency in Rs 2,000 notes )

 

Expect opposition to quote the “ failure “ of De-Monetization to get rid of Black Money

 

They will strongly oppose total replacement of paper currency, citing enormous inconvenience / hardship this will cause the poor people . I agree with them

Please enable a JPC ( headed by Opposition Member ? ) to draft the Crypto Bill, with full unanimity

 

 

I agree that the objective should be limited to :

 

“ Reduced dependency on cash “

 

 

And not :

 

“ Replacement of Cash “

 

 

May be, 5 years after introduction of IndiaBit, this ( larger ) objective would find acceptance

 

 

With Regards,

Hemen Parekh  /  hcp@RecuitGuru.com  /  26 July 2022