The Reserve Bank of India released a concept note on its digital currency on Friday, stating that it will soon begin launching the e-rupee for specific use cases.
In a statement, the central bank said the aim behind the issuance of the concept note is to create awareness about the central bank’s digital currency and the planned functions of the digital rupee.
“The concept note also discusses key considerations such as technology and design choices, potential uses of the digital rupee and issuance mechanisms,” the RBI said in a statement.
Here are the key highlights of the RBI’s digital currency concept note.
1. The concept note states that the central bank digital currency is a sovereign currency issued by the central banks in accordance with monetary policy. It will appear as a liability on the central bank’s balance sheet.
2. The digital currency must be accepted by all citizens, businesses and government agencies as a means of payment, legal tender and safe store of value.
3. The digital currency will be freely convertible into commercial bank money and cash. It will become a fungible legal tender that does not require holders to have a bank account.
4. It is expected to reduce the cost of issuance of money and transactions. Faced with declining use of paper money, central banks are now trying to popularize a more acceptable electronic form of currency.
5. The central bank digital currency will be backed by India’s advanced payment systems that are affordable, accessible, convenient and secure. The RBI concept note says the e-rupee will strengthen India’s digital economy, improve financial inclusion and make money and payment systems more efficient.
6. The digital currency should be developed as a platform that is highly scalable to support very high volume and pace transactions without performance degradation. It must be robust to ensure the stability of the financial ecosystem and have tamper-resistant access control protocols and cryptography for data security, among other things.
7. Citing security concerns, the RBI concept note states that central bank digital currency ecosystems may have a similar risk of cyber-attacks as current payment systems. “Cybersecurity considerations must be taken into account, both for the item and for the environment.
8. The central bank’s digital currency is expected to generate huge amounts of data in real time. “After taking into account concerns regarding anonymity, appropriate analytics of Big Data generated from CBDC can aid evidence-based policy making. It can also become a rich data source for service providers for financial product insights,” according to the concept note.
9. RBI emphasizes consumer protection and calls it an important pillar of financial stability. The central bank has called for a consumer protection framework that should take into account the variations in consumers’ digital literacy and ways to increase consumer understanding and transparency.
10. The RBI called for seamless consumer access to digital currencies. It also emphasized effective and efficient resolution of customer complaints through a robust mechanism.