India and Nigeria, two of the world’s largest emerging economies, are ramping up their plans to launch central bank digital currencies.
In a speech, Reserve Bank of India deputy governor Shri T Rabi Sanker says “perhaps the time for CBDCs is nigh”, adding that the bank is “working towards a phased implementation strategy”.
India has invested heavily over the last decade in electronic payments, rolling out the Unified Payments Interface (UPI) and RuPay network in an effort to wean citizens off cash.
However, Sanker says that a CBDC still has several advantages over other digital payments.
“Imagine a UPI system where CBDC is transacted instead of bank balances, as if cash is handed over – the need for interbank settlement disappears. CBDCs would also potentially enable a more real-time and cost-effective globalization of payment systems,” he told his audience during a webinar.
Sanker says that despite the rise of electronic payments in India, cash is still popular for small value transactions. A CBDC could help change this, especially if anonymity is maintained.
The deputy governor also says that a CBDC could stem the popularity of private virtual currencies. Indian authorities have tried to clamp down on the use of the likes of bitcoin over volatility fears.
With an inter-ministerial committee already recommending the introduction of a CBDC as a digital form of fiat money, the RBI is working on a phased implementation and examining use cases.
Sanker says that the bank is still exploring whether to stick to retail payments or to also go for wholesale. Other considerations include whether a CBDC should use a distributed or a centralised ledger; whether to go with a token based or account based option; and whether to use direct issuance by the RBI or to go through banks.
Separately, the Central Bank of Nigeria’s formation technology director, Rakiya Mohammed, used a webinar to reveal that the West African country will launch its CBDC pilot on 1 October.
According to local press reports, the pilot, called Giant, will use the Hyperledger fabric blockchain.
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23 July 2021, Published on Finextra
