RBI Governor Hints at CBDC for Cross-Border Payments and Security Against Crypto Risks
India will soon make cross-border payments a reality with the introduction of Central Bank Digital Currency. The governor of the Reserve Bank of India, or RBI, Shaktikanta Das, says that with CBDC, cross-border money transfer will be cheaper and faster than it previously was. Das, while speaking recently at the “Central Banking at Crossroads” conference, brought into view the probable use of CBDCs related to international money transfers.
CBDC could be a Game-Changer for Cross-Border Payments
He pointed out that the advanced financial system of India turned out to be a very strong foundation for the use of CBDC in cross-border payments. Very few large economies, including India, operate a real-time gross settlement system called 24×7 RTGS, enabling real-time funds transfers. The possibility of the expansion of the system to global currencies like the US Dollar, Euro, and British Pound is considered along with integrating CBDCs into this system.
Das foresaw such an expansion could be bilaterally or multilaterally extended by agreements that could allow more seamless and faster international transactions. The vision of the governor reflects the larger Indian aspiration to take the lead in global financial innovation, particularly in developing efficient systems of cross-border payments.
India’s CBDC Pilot: Progress and Goals
The Indian pilot began in December 2022 as a part of the planned phased launch for the CBDC, targeting both the retail and wholesale segments. The ongoing programmability and interoperability testing includes the digital rupee with existing payment infrastructures like UPI. It also tests offline capability to address issues in far-reaching and under-resourced areas and ensures that the digital currency of India reaches a larger section of the population.
Although the digital rupee saw poor uptake at its onset, the platform recently crossed a major milestone of more than 5 million users in August this year. Encouragingly, local banks have extended various credits to users, such as offering CBDCs as partial salary payments. Such moves, while encouraging, do beg certain questions regarding the long-term viability and public acceptance of the digital rupee.
CBDCs vs Cryptocurrencies
He has used the platform to draw a sharp contrast between CBDCs and cryptocurrencies. While CBDCs offer a digital currency ecosystem that is stable and controlled, private cryptocurrencies like Bitcoin and Ethereum are volatile and a threat to economic stability.
He reiterated that CBDCs are a safer alternative in the digital space. Das further emphasized the need for a broad framework for CBDCs whereby countries can build on their systems’ idea but under a uniform global standard to enable fast and safe international trade and payments.
