when you make one UPI Payment, Yours Bank Settles the amount on your behalf at the end of the day. digital Payments like UPI are electronic instructions that authorize intermediaries like banks to facilitate transactions. Even if they are ‘cashless’ modes of payment, they involve the transfer of fiat money (government-issued currency). Now imagine a UPI-like system where instead of bank balance, digital currency issued by a central bank is transacted. The need for interbank settlement disappears and you have the option of making payments to anyone securely without the risk of third parties. What if money itself could be ‘digital’?
The RBI has called for a complete ban on crypto because it believes that partial restrictions will not work. But, at the same time, it is looking to issue its own digital currency by taking advantage of the technology that powers crypto. “A central bank digital currency (CBDC) will also potentially enable more real-time and cost-effective globalization of payment systems. The time zone difference will no longer matter,” RBI deputy governor T Rabi Shankar said in a speech last year.
RBI defines CBDC as legal tender issued by a central bank in digital form. “It is similar to a fiat currency and one-to-one exchangeable with fiat currency. Only its form is different,” Shankar said. RBI is working towards a phased implementation strategy.
But what is the need of CBDC in India where cash is popular? According to Shankar, countries with significant cash usage are seeking to make issuance more efficient as CBDCs can reduce the cost of disbursing money.
Cryptocurrencies emerged in the last decade promising secure, anonymous and efficient transactions. However, being decentralized – meaning no authority can regulate them – privately issued virtual currencies threaten state control over money.
a US Fed The paper, released last week, states that the foundation of a CBDC – a combination of cryptographic and distributed-ledger (blockchain) technologies – was created by Crypto. But legal experts say that apart from the underlying technology, there is no similarity between crypto and CBDC. Manvinder Singh, Partner, J Sagar Associates said, “People are not getting crypto to transact, they are investing because they believe the asset will appreciate because of the excess supply of fiat currency. The value deteriorates.” He added that CBDCs are expected to be a method of payment and not an asset like crypto.
According to a report by the Bank for International Settlements (BIS), about 86 percent of the world’s Central bank Researching CBDCs.
However, CBDCs can disrupt the status quo of banks, said Mahesh Nair, associate partner at IBM. “The central bank may allow the creation of (CBDC) wallets directly with it instead of commercial banks. The latter may have a reduced role as a custodian of cash,” Nair said.
The RBI deputy governor also noted the risk of banks’ credit-creating capacity being hampered. “It is important to design and implement CBDCs in a way that makes the demand for CBDCs more manageable than bank deposits,” he said.
A legal framework would need to choose either a distributed or centralized ledger, define the level of anonymity and role of banks, and address cyber security concerns.
Visit www. TimesDecrypt.com for more updates on crypto
The RBI has called for a complete ban on crypto because it believes that partial restrictions will not work. But, at the same time, it is looking to issue its own digital currency by taking advantage of the technology that powers crypto. “A central bank digital currency (CBDC) will also potentially enable more real-time and cost-effective globalization of payment systems. The time zone difference will no longer matter,” RBI deputy governor T Rabi Shankar said in a speech last year.
RBI defines CBDC as legal tender issued by a central bank in digital form. “It is similar to a fiat currency and one-to-one exchangeable with fiat currency. Only its form is different,” Shankar said. RBI is working towards a phased implementation strategy.
But what is the need of CBDC in India where cash is popular? According to Shankar, countries with significant cash usage are seeking to make issuance more efficient as CBDCs can reduce the cost of disbursing money.
Cryptocurrencies emerged in the last decade promising secure, anonymous and efficient transactions. However, being decentralized – meaning no authority can regulate them – privately issued virtual currencies threaten state control over money.
a US Fed The paper, released last week, states that the foundation of a CBDC – a combination of cryptographic and distributed-ledger (blockchain) technologies – was created by Crypto. But legal experts say that apart from the underlying technology, there is no similarity between crypto and CBDC. Manvinder Singh, Partner, J Sagar Associates said, “People are not getting crypto to transact, they are investing because they believe the asset will appreciate because of the excess supply of fiat currency. The value deteriorates.” He added that CBDCs are expected to be a method of payment and not an asset like crypto.
According to a report by the Bank for International Settlements (BIS), about 86 percent of the world’s Central bank Researching CBDCs.
However, CBDCs can disrupt the status quo of banks, said Mahesh Nair, associate partner at IBM. “The central bank may allow the creation of (CBDC) wallets directly with it instead of commercial banks. The latter may have a reduced role as a custodian of cash,” Nair said.
The RBI deputy governor also noted the risk of banks’ credit-creating capacity being hampered. “It is important to design and implement CBDCs in a way that makes the demand for CBDCs more manageable than bank deposits,” he said.
A legal framework would need to choose either a distributed or centralized ledger, define the level of anonymity and role of banks, and address cyber security concerns.
Visit www. TimesDecrypt.com for more updates on crypto
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