RBI governor touts CBDC to enhance cross-border payments and safeguard against crypto risks

According to Shaktikanta Das, governor of the Reserve Bank of India, India has the potential to facilitate effective cross-border payments using the Reserve Bank Digital Currency.

According to a local report, Das, in his keynote speech at the Central Banking conference at Crossroads, reaffirmed his support for CBDCs to improve international money transfers as part of ongoing efforts to reduce the time and cost of overseas remittances.

Highlighting that India is one of the few major economies operating a 24×7 real-time gross settlement system, Das added that the expansion of the RTGS system to settle trade in global currencies such as the US Dollar, Euro and British Pound is currently under review. .

According to Das, this could be achieved through bilateral or multilateral arrangements that would simplify global transactions, with CBDCs potentially integrated into this expansion.

He added that India’s CBDC pilot programs are currently testing programmability and interoperability with existing infrastructures such as the Unified Payments Interface, a platform that facilitates near-instant payments between banks.

Additionally, the pilot program is working to develop offline solutions for “remote areas and underserved communities,” according to the RBI governor.

The RBI had first announced these features in September 2023, stating that it was collaborating with major financial institutions to introduce them as part of its efforts to popularize CBDC.

Das also reiterated his skepticism about cryptocurrencies, noting the uncertain landscape they create. According to him, CBDCs offer a controlled and stable digital currency, unlike the volatility of cryptocurrencies such as Bitcoin and Ethereum.

The governor acknowledged the challenges associated with developing a universal CBDC framework and called for the creation of a standardized and interoperable CBDC framework that would allow nations to create their own systems that fit into a global network.

India launched its CBDC pilot for digital rupee in December 2022, covering both retail and wholesale segments. However, adoption has been slow, with the digital rupee set to reach 1 million retail transactions by the end of June 2023, but after local banks introduced incentives to boost usage and salaries were partially paid in the digital currency, raising doubts about actual user adoption.

As of the latest update, the CBDC platform surpassed 5 million users in August; Das advocates for a phased rollout and stressed the importance of understanding the impact on users, monetary policy and the broader financial system.

Meanwhile, the RBI remained firm against cryptocurrencies, citing their potential risks to the economic stability of the country. In 2022, Das expressed concerns about cryptocurrencies’ lack of intrinsic value.