As the winter session of the Parliament began on November 29, Monday, the ministry of finance in a written reply to a question regarding the Central Bank Digital Currency has said that it has received a proposal from Reserve Bank of India (RBI) in October, 2021 for an amendment to the Reserve Bank of India Act, 1934 to enhance the scope of the definition of ‘bank note’ to include currency in digital form.
On the first day of the winter session of the Parliament, the government received questions regarding the looming ban of cryptocurrency and the RBI’s plans to introduce an official digital currency. It asked whether the government has received any proposal to introduce Central Bank Digital Currency in
the country. It also asked for the details of the proposal and the plans to introduce digital currency.
To this, minister of state in the finance ministry, Pankaj Chaudhary, replied in a written not. “Central Bank Digital Currency (CBDC) is introduced by a Central Bank. Government has received a proposal from Reserve Bank of India (RBI) in October, 2021 for amendment to the Reserve Bank of India Act, 1934 to enhance the scope of the definition of ‘bank note’ to include currency in digital form. RBI has been examining use cases and working out a phased implementation strategy for introduction of CBDC with little or no disruption,” he said.
To a question related to the purpose of introducing digital currency and asking whether any assessment has been done on the implications of the same, the minister said that the move will have significant benefits.
“Introduction of CBDC has the potential to provide significant benefits, such as reduced dependency on cash, higher seigniorage due to lower transaction costs, reduced settlement risk. Introduction of CBDC would also possibly lead to a more robust, efficient, trusted, regulated and legal tender-based payments option. There are also associated risks which need to be carefully evaluated against the potential benefits,” Chaudhary said in the reply.
The government’s reply comes amid reports that the RBI’s Central Bank Digital Currency is likely to be included in the government’s upcoming Bill on regulating cryptocurrencies during the winter session of the Parliament. In a report by the Economic Times, quoting government sources, it was said that the Bill was a response to the RBI’s concerns over macro-economic stability. The official said that the “government’s response is not to ban cryptocurrencies but rather to provide cryptocurrency via the RBI.”
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, notified in a Lok Sabha bulletin days ago, seeks to prohibit all private cryptocurrency. In turn, it also proposes to introduce an official digital currency of the central bank, Reserve Bank of India.
“The bill also seeks to prohibit all private cryptocurrencies in India. However, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses,” said a bulletin released by the Lok Sabha last week. It also sought “to create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India”, while also seeking to “allow for certain exceptions to promote the underlying technology of cryptocurrency and its uses…,” the bulletin added.