The Reserve Bank of India has announced the start of trials for an electronic rupee amid growing international interest in digital currency.
Yesterday, central bank governor Shaktikanta Das confirmed that trials could begin as early as December. “I think by the end of the year, we should be able to – we would be in a position to start our first trials,” he said in a CNBC interview.
Das said that the Reserve Bank of India is being “extremely careful” about the new product and is studying its potential impact on security, the financial sector and the government’s monetary policies.
The bank is also exploring the choice between using a centralised or decentralised ledger for the currency.
The news comes as governments across the globe explore the use of digital currencies backed by central banks, known as CBDCs. The People’s Bank of China is a front runner in the field and has already issued a digital version of the yuan.
Trials for the digital rupee will likely be watched avidly by central banks in both the UK and the European Union. Both the Bank of England and European Central Bank have announced research into issuing a digital currency with the EU claiming that an e-euro could be operational by 2025.
CBDCs could give the public a safer alternative to holding deposits in accounts backed by fallible banks. Central banks would lend money directly to the public while the electronic currency could also facilitate cheap cross-border payments.
In April the Bank of England and HM Treasury announced the creation of a join Taskforce to coordinate research into a UK CBDC which is ongoing.