Faraway destination?

The Reserve Bank of India (RBI) is working on issuing a digital currency Rupee like cryptocurrency, but the value of this currency will be the same as the printed currency Rupee note. It will be monitored by the RBI on a real-time basis. Currently, in India, cryptocurrency like bitcoin is being used on a wide scale. As of July 9, 2021, 15 million people in India were using cryptocurrency, while by June 2021, 221 million people were using cryptocurrency in the world.

As per a joint study of "World Pay" financial information systems (FIS), in India. 40 per cent of e-commerce is being paid through digital wallets. 50 per cent of retailers in Sweden will stop taking cash as payment by 2025. The share of banknotes in payments in England will drop to just nine per cent by 2028. In Japan, 28.6 per cent of payments are being made digitally, while in South Korea, 96 per cent of payments are being done digitally.

At present, the RBI prints notes according to the need, which reach the market through banks, which takes a lot of time, whereas the RBI will be able to send the digital currency Rupee directly to the user through mobile, laptop or desktop. After receiving it from the RBI, a person can transfer it to another person. The sent digital currency Rupee will neither be deposited in any wallet nor in any bank account.

The RBI believes that the digital currency rupee can reduce the loss of those people who are using bitcoin or other cryptocurrencies, because the digital currency rupee may motivate them to use it. In reality, the introduction of this new currency is unlikely to reduce the use of bitcoin or other cryptocurrencies in any way, as the profits are higher in bitcoin or other cryptocurrencies. For example, on August 24, 2021, the price of one bitcoin was Rs 38,48,833 and the price of one Ethereum was Rs 2,59,364. For this reason, existing cryptocurrencies are being used more for illegal purposes.

Central Bank Digital Currency (CBDC) is an electronic form of cash. The way people transact with cash, in the same way, transactions can be done with the digital currency Rupee. CBDCs will operate somewhat on the lines of cryptocurrencies such as bitcoin or Ethereum. However, the digital currency Rupee cannot invest in the majority because most of the people in India are neither financially literate nor techno-savvy. Not all Indians even have a smartphone. As of January 31, 2020, 1,156 million people were using mobiles in the country, but the number of smartphone users was only about 500 million.

Now, bitcoin or other cryptocurrencies are being issued privately, due to which there is no control on cryptocurrencies. Most of its users transact anonymously. Today cryptocurrencies are being used more in terrorist and illegal activities. One of the major reasons for its use is the desire to get rich quickly, as the price of these cryptocurrencies fluctuates every time. Since their number is limited, therefore, their price fluctuates according to the demand-supply.

China created a CBDC research group in 2014 and launched two pilot projects on digital currency in April 2020, under which e-yuan was distributed through a lottery system. By June 2021, 24 million people and companies had created digital yuan wallets. According to a Bloomberg report, the share of the digital yuan in China's economy will reach nine per cent by the year 2025. If this experiment of China is successful, then China will become the first country in the world to introduce a central bank digital currency.

In 2015, the United Kingdom included digital currency in its research agenda. In the year 2016, the Bank of Canada launched Project Jasper for digital currency. In the year 2017, France launched Project MADRE for digital currency. In the year 2018, the Korean bank started work on digital currency. In the year 2019, the European Bank ECB launched the Digital Euro Project. In the year 2021, the US has announced the launch of a pilot project of five digital dollars.

In January 2021, the Bank of International Settlements said that 86 per cent of central banks around the world are working on developing a digital currency. Smaller countries like the Bahamas have recently started using the digital currency "Sand Dollar" as a CBDC. Countries like Japan, Sweden, Switzerland etc. are also working to develop digital currency in collaboration with the Bank of International Settlements.

The proposed digital currency Rupee has many advantages: its introduction will reduce dependence on cash, digital transactions will make the payment system simpler and faster, cost of currency will be reduced, and corruption will also be curbed. A person will not need to have a bank account for this digital currency. Its transaction can be done offline and it can also be monitored on a real-time basis.

In this connection, the RBI has not yet started any pilot project. However, the RBI's digital payments webpage states that research on alternatives to CBDCs is being done by the RBI. The problem is also that even at the global level, the digital currency has not yet been issued on a large scale in any country. Pilot projects are going on in China only. Because of this, there is no model, seeing which further action can be taken.

As per the RBI Governor Shaktikanta Das, the RBI is facing many technical & economic stability problems while developing this digital currency Rupee. Recently, the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 has been drafted, which is considered as a major step towards implementing India's digital currency Rupee, but this bill is only a legal framework. And it does not discuss digital currency in detail. There is still no clarity about the process of developing or controlling or implementing the digital currency rupee.

In such a situation, it is not easy to introduce a digital currency Rupee. However, with the introduction of the e-Rupee in the country, the possibility of the introduction of digital currency rupee has been increased. There are many financial and technical problems associated with it, as well as the digital currency rupee is still beyond the understanding of common people, because about 70 per cent of India's population still lives in villages and India's literacy level is still 77.7 per cent, which suggests that the road to digital currency Rupee in India is still bumpy.

Views expressed are personal