A booklet on payments released by the RBI Monday (Jan. 25), said the bank is “exploring the possibility as to whether there is a need for a digital version of fiat currency,” the report stated, adding that it would put one into use if necessary.
The RBI does acknowledge how popular cryptocurrency has become, although Indian regulators and the local government are still apprehensive and skeptical, according to Cointelegraph.
While central bank digital currencies (CBDCs) are considered legal tender in the country, the government and regulators have considered them a “liability,” Cointelegraph reported. The relationship the government has with digital currencies has been complicated over the years, with the country’s supreme court in March overturning a blanket ban on crypto, which had affected crypto businesses there since 2018.
Since then, the number of exchanges has grown in the country. However, many people working in the space have expressed doubt that crypto will flourish in India, Cointelegraph reported.
If the RBI develops a digital currency, it could easily help further development in crypto, with the RBI reporting strong growth in digital payments in the country. According to Cointelegraph there has been a 12.5 percent and 4.5 percent increase in volume and value, respectively, since 2011.
In addition, the RBI might try to expand adoption of crypto by targeting people born between 1982 and 2004, which has been considered “the generation which is most responsive to technology and digital age,” according to the report.
If India moves forward with the digital currency idea, it would be following a path set by China, which has been undergoing a series of digital yuan trials since last year in order to explore how consumers would respond. Other countries might end up looking to China for guidance.