The EU, the US, China, and Britain have announced plans to introduce digital currencies. India is the latest to join the growing list.
India has become the latest country to consider issuing a central bank digital currency (CBDC), the country's reserve bank deputy chief announced on Thursday.
T. Rabi Shankar, the deputy governor of the Reserve Bank of India, said the bank was considering a phased introduction of its own CBDC and is examining various issues including the underlying technology and issuance method.
"CBDCs are likely to be in the arsenal of every central bank going forward. Setting this up will require careful calibration and a nuanced approach in implementation," Shankar said according to a speech released late on Thursday.
"As is said, every idea will have to wait for its time. Perhaps the time for CBDCs is nigh," he added.
Majority of banks looking at CBDCs
According to a 2021 survey by the Bank for International Settlements, 86 per cent of central banks were actively researching the potential for CBDCs, 60 per cent were experimenting with the technology and 14 per cent were deploying pilot projects.
China leads the space and has already started trials of a digital currency in several cities while the US Federal Reserve and Bank of England are looking into it for a future launch.
RBI has been working on the idea of CBDC for years. Virtual currencies (VCs) like Bitcoin have gained popularity in India in recent years and unofficial estimates suggest the country has around 15 million investors holding over 100 billion rupees (€1.14 billion) in crypto assets.
The RBI has repeatedly voiced its concern over the spread and use of cryptocurrencies which it sought to outlaw in April 2018. It had to withdraw the ban in March 2020 when the country's top court said the move was unconstitutional.
"CBDCs are desirable not just for the benefits they create in payments systems, but also might be necessary to protect the general public in an environment of volatile private VCs," Shankar said with regards to the need for CBDCs for emerging economies.
Sameer Narang, chief economist at Bank of Baroda said investors would still look to private digital currencies, which have appreciated in value despite recent falls.
"Some users may want to use the private digital currencies as store of value and not only for payments," he added.