“We can’t give a timeline on CBDC, but what I can say is that whatever we are doing, we are doing it very carefully and cautiously,” Das said in a press conference following the bi-monthly monetary policy announcement. “We have to keep risks like cyber-security and counterfeiting in mind. So, we are proceeding cautiously and can’t give a timeline.”
In the recent union budget, Finance Minister Sitharaman had announced that the RBI will introduce a central bank-backed digital currency this year.
According to T Rabi Sankar, deputy governor at the RBI, the central bank has been working on a CBDC for the last 18-24 months.
“As announced in the budget, we will launch the digital rupee this year and test design features and other aspects of the currency this year,” Sankar said. “Work is progressing on wholesale and retail use of the CBDC. Account-based models are easier to develop, whereas token-based models take longer to develop, which model we will decide to test first will be decided at a later date.”
Unlike private cryptocurrencies, a CBDC is issued by the central bank and is another form of fiat currency.
Governor Das reiterated his warning that other crypto currencies would harm financial and economic stability and that investors are taking risks in investing them. Das likened cryptos to the tulipmania, a speculative bubble which took place in the 17th century when Dutch investors purchased tulips, pushing their prices to unprecedented highs.
“As far as cryptocurrencies are concerned, the RBI stance is very clear, private cryptocurrencies are a big threat to our financial and macroeconomic stability,” the governor said. “They will undermine RBI’s ability to deal with issues related to financial stability. I think it is my duty to tell investors that when they are investing in cryptocurrencies, they should keep in mind that they are investing at their own risk. They should keep in mind that these cryptocurrencies have no underlying (asset). Not even a tulip.”