Central Bank Digital Currency (CBDC) Can it Replace Notes and Coins in India
In golden old days when notes and coins were still to become medium of exchange, barter system was prevalent. With the growth of economies and trade relationship amongst countries, notes and coins emerged as means of exchange with global acceptability of currency unit of some countries like USD in foreign trade. Major disruption in the present system of use of currencies in settlement of goods and services is glaring in the form of digital currencies, popularly known as Crypto CurrencieslikeBitcoin. In this paper, effort has been made to understand need of Digital Currency from Central Banks (CBDC). The paper is an attempt to explain possibility of CBDC as replacement of actual currency and its advantages and disadvantages for India.In India, cryptocurrency was illegal either as means of exchange or as commodity for storage. After Hon’ble Supreme Court’s judgement on the issue, RBI has to explore possibility of usage of cryptocurrencies. A Bill is proposed on the subject in this session of Parliament. Challenges in introduction of CBDC in India, risk associated with CBDC and likely architecture of CBDC has been discussed in the paper. The paper provides idea aboutefforts in introduction of cryptocurrencies around the world so far.Further,the paper explores possibility of Financial Inclusion through CBDC and likely challenges for Central Banks on Monetary Policy front. The paper also explores possibility to make CBDC unique instrument for peer to peer offline transactions without mobile or internet connectivity.
Copyright (c) 2021 Dwijendra Kumar Kashyap, J Meena Kumari
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