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Central Bank Digital Currency – Opportunities and Obstacles for India By: Rahul Sinha (St. Xavier’s University, Kolkata)
Abstract: In the recent times, cryptography and blockchain technologies have enabled various fields and provided certain prospects for progress. Central Bank Digital Currency is a concept which lies on the foundation built by cryptography and blockchains. Various nations like Bahamas, China, Singapore and Switzerland have already established their hold on Central Bank Digital Currencies and have been recognized as one of the first movers in their concerned spaces. In this article, we will try to figure out whether CBDC’s are the next “Big change” in the global financial, governance or the technological space and while doing so, our aim is to understand the basics of CBDC’s, analyse the global best practices and find out the probable use cases which India can implement in order gain global recognition. Introduction: Central Bank Digital Currencies will not only help in advancing digitalisation of payments but retail, wholesale and Cross-border CBDC’s will expand choices and diversify payment option for the users. It will enable non-banking public to use the money generated by central bank while making payments in a digital ecosystem. Since the decline of cash has already been accelerated by the global pandemic, Retail CBDC’s have a great scope to develop even during these tough times. These digital currencies offer public, the choice of making a retail payment outside of the banking system, which is very similar to a cash transaction that doesn’t require an intermediate bank. Retail CBDC’s: These are distributed by the banking system and held in electronic wallets in form of digital cash/currencies. This mode of payment enables consumer to consumer, Consumer to Business and Business to Consumer transactions. Retail CBDC’s not just facilitates instant settlements but also reduces the risk of inherent batch clearing of retail payments. To issue Retail CBDC’s the Central Bank can also partner with telecom operators to directly roll out digital currencies for public use. Private operators can undoubtedly deliver near universal payment services. Retail CBDC’s Amplifies financial inclusion and prevents terrorism funding by encrypting transactions, restricting use for certain purposes and enabling traceability.
