RBI Governor Rules Out Private Digital Currencies But Discussion Underway For A Centralized One

  • No to private digital currencies because currency issuance is a sovereign function
  • Discussions for a centralized digital currency, however, are going on but “Technology has not fully evolved yet”
  • While the EU, France, and Ghana are planning on issuing a CBDC, Japan and Korea don't see a demand for it

India's Central Bank, the Reserve Bank of India (RBI) governor has ruled out the private digital currencies like Libra, asserting government's right over this function. Saktikante Das told reporters on Tuesday:

“The world over, central banks and the governments are against private digital currency because currency issuance is a sovereign function and it has to be done by the sovereign.”

Das, however, said that discussions are underway for a centralized digital currency but it’s too early to share any specifics about it. But he assured that the RBI is indeed looking into this. The governor said:

“It is very early to speak on a central bank issuing digital currencies. Some discussions are going on. Technology has not fully evolved yet. It is still in very incipient stage of discussions and at RBI we have examined it internally.”

Discussions have been held with the governments and central banks of other countries for a central bank-issued digital currency but for now, Das said it is too early to talk about. He said:

“As and when the technology evolves with adequate safeguards. I think it is an area where the Reserve Bank will certainly look at seriously at an appropriate time.”

Who else in the Race for a Central Bank-issued Digital Currency?

India’s stance on Libra reflects that of governments around the world. European Union finance ministers agreed on Thursday that private digital currencies like Libra shouldn’t be allowed in the EU until their risks posed by them are fully addressed.

They are also considering to regulate crypto-assets while praising European Central Bank's development on a public digital currency.

In a paper published on Wednesday, ECB said that it would issue its own digital currency if the private sector fails to make cross border payments faster and cheaper.

François Villeroy de Galhau, the governor of the Bank of France, also announced that the central bank is planning to pilot a CBDC for financial institutions in 2020.

Ghana is also in this race as central bank chief, Ernest Addison also said that they could issue a digital form of the cedi, the nation's currency in the “near future.” They are currently in talks to develop a pilot project in a “sandbox environment.”

Amidst this, the Bank of Japan (BOJ) governor Haruhiko Kuroda said there is no demand for a CBDC in the country as “the amount of cash outstanding is still increasing.” However, they are conducting technical and legal research so that it is ready when the need arises in the future.

Just like Japan, the Bank of Korea (BOK) has no immediate plans to issue a CBDC. “Our view is that most Korean people do not feel difficulty in making transactions with current payment methods. Under the circumstances, we do not have to be in a hurry to catch up with the latest trend whose security and stability have not been confirmed,” said an official in charge of digital payment research at the bank.

Also Read: Ghana's Central Bank Governor: Government Could Launch a CBDC in Near Future

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