India has been at the forefront of adopting emerging payments, and recent comments from a central bank official suggest that a central bank digital currency (CBDC) could play a vital role in the country’s future economy.
The remarks were made during a farewell speech by Shaktikanta Das, the governor of the Reserve Bank of India. Das said that the country’s CBDC, the digital rupee, “has a huge potential in the coming years, in the future. In fact, it is the future of currency.”
Das also highlighted the country’s strides in payment innovations, applauding the RBI for its leadership as a trailblazer among central banks. Notably, India is one of the few countries that has launched a CBDC.
“The economy of India is very accepting of new technologies—namely the digital identity program there that has over a billion people using it,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “It really comes down to the consumer’s willingness to use it and the implementation of it.”
Phased Adoption
Das has previously expressed caution regarding the widescale implementation of a CBDC, citing concerns about the technology’s ramifications on consumers and the economy. However, the former governor now believes that a deeper understanding of these implications can be gained through user data generated in pilot programs. Additionally, Das suggests that the introduction of a CBDC could be phased in gradually to mitigate any risks.
After the eventual adoption of a CBDC, Das is confident that it could be the underpinning for both domestic and cross-border payment systems in India’s future economy.
No Barriers
India has already established itself as a forerunner in instant payments, thanks to its widely popular UPI platform, which has become the most dominant payment method in the country. This success has enabled India to export its instant payments system to other countries, including South America and Africa.
Though there has been speculation about whether the digital rupee and UPI instant payments can coexist, Das made previous comments that there should be no competition between the two. Consumers could make either a UPI or a CBDC payment from the same QR code, so there should be no barrier to the adoption of either payment method.
“Whether it’s a retail or wholesale CBDC will dictate some of those factors, but India has led the world in some areas of innovation,” Hugentobler said. “If they are seeking real adoption of users for their CBDC, they will focus on privacy, security, and interoperability between existing systems. It will be interesting to see if their roll out is successful, and if so, which central bank will be next.”
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