The Reserve Bank of India (RBI) published its annual report this week and buried within the massive tome are many indications as to the banks perspective on Fintech. One item of note is the fact the RBI is currently studying the possibility of issuing a Central Bank Digital Currency (CBDC) – a pursuit that several other central banks have initiated.
According to the document;
“Rapid changes in the landscape of the payments industry, along with factors such as emergence of private digital tokens and the rising costs of managing fiat paper/metallic money, have led central banks around the world to explore the option of introducing fiat digital currencies. In India, an inter-departmental group has been constituted by the Reserve Bank to study and provide guidance on the desirability and feasibility to introduce a central bank digital currency.”
The RBI says they have been keeping a close watch on the emerging cryptocurrency sector of finance. The Bank explains that the regulatory response globally has ranged from a complete shutdown (like China), to a more “light touch regulatory approach” – referencing the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Asia is a noted hotspot of activity where Japan and South Korea account for a prominent share of digital asset trading.
The annual report says that cryptocurrency presently does not currently a systemic risk – echoing the perspective of most all other regulators and multi national organizations. Overall, the cryptocurrency market is estimated to be at just US $800 billion (January 2018).
While on face value it is interesting that the RBI is studying the issuance of CBDC, perhaps the more important aspect of the Annual Report is the fact the Bank recognizes the impact digital assets, or virtual currencies, may have on payments, transfers and financial services in general. That and the fact there is potential for positive benefits as well as the opportunity for illicit activities from the emerging cryptocurrency sector.
You may read the Reserve Bank of India Annual Report here.