“The amendment to the RBI act with regard to the CBDC says that currency will also include digital currency,” Shaktikanta Das, Governor, RBI said while interacting with reporters post the monetary policy announcement. “So, in all respects there is no difference in the eyes of the law, there is no difference in treatment between paper currency and digital currency. The income tax department has got certain limits on cash payments and withdrawals, the same rules will apply to CBDC also.”
Deputy governor T Rabi Sankar said that the regulator is looking at a technological solution to offer anonymity.
“Fundamental feature of cash is anonymity, the reason it’s still being used in several developed countries is because people love their privacy,” Sankar said. “How anonymity has to be ensured in the case of a digital currency because the normal understanding is that anything digital leaves a footprint can have various solutions. We can look at largely a technological solution, we understand it’s possible to do that. It is also possible to get a legal provision to ensure anonymity. What exactly will happen depends upon how things evolve.”
Sankar also said that the evolution of the CBDC will depend on how much the start-up and fintech ecosystem innovates and the kind of channels it opens up using e-rupee as the base.
“We will set up the base system so that the private sector can innovate,” he said.
ET had recently reported that the central bank has asked lenders not to report low-value transactions made via the digital rupee, seeking to ensure its proposed virtual currency offers a similar degree of anonymity associated with paper money for business exchanges below a material value threshold. Once the CBDC-R (Central Bank Backed Digital Currency-Retail) is transferred to customer wallets, banks will not track or report these transactions.
The central bank has announced the launch of the retail version of the digital rupee on December 1. In the first phase, State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank will carry out the implementation in four cities — Mumbai, New Delhi, Bengaluru and Bhubaneswar.
Das also tried to answer doubts of people who are comparing the UPI and the CBDC platform. Das said that it was incorrect to compare both as one is a payment platform while another is a digital currency.
“Several questions have been raised on what is the difference between UPI and CBDC,” he said. “Any UPI transaction involves the dis-intermediation of the bank. When I use my UPI app, the message goes to the bank, the account gets debited and the money gets transferred to the recipient. Just like the paper currency, if you are drawing Rs 1000 from your bank. You shop for Rs 500 and keep the remaining in your wallet. In CBDC as well you are drawing the money and keeping it in your wallet, which is basically your mobile phone. When you make a payment to a shop or a person, money will move from your wallet to his wallet, there is no inter-mediation of the bank.”