Central Bank India: Cryptocurrency Ancam CBDC And Economic Systems

India's central bank will issue a CBDC for cryptocurrency dams. (Photo; Doc. Unsplash)

JAKARTA The cryptocurrency market has decreased in recent months, which has been triggered by the collapse of Terra LUNA since May 2022. In November, cryptocurrency was hit hard by the problem of FTX bankruptcy.

Even so, cryptocurrencies are still considered a threat to the country's economic system. According to Deputy Governor of the Reserve Bank of India (RBI) T. Rabi Sankar, cryptocurrencies have developed. Sankar added that cryptocurrencies pose a threat to investors and the country's economic system.

However, Sankar explained that the digitization of currencies such as CBDC (central bank digital currencies) could provide benefits in the future. This was conveyed by Sankar in an event held by the Association of Bank India (IBA) on Friday, December 2. On that occasion, Rabi Sankar discussed cryptocurrencies and CBDC.

"We are looking at the environment where private currencies are developing. We recognize that this is a threat to investors, systems and the economy. We are also aware that private currencies have shown that currency digitization may be profitable," said Indian Central Bank executive T Rabi Sankar.

Cryptocurrencies have rocked traditional economic systems that are all centralized and regulated by central banks in various countries. Cryptocurrencies appear as alternatives to centralized economic systems. Crypto is decentralized and no entity or third party regulates it. Therefore, crypto is a threat to some circles.

"The way to deal with it (cryptocurrency) is to provide digital currency," added Sankar.

Sankar assesses that cryptocurrencies that are not issued by the government are private cryptocurrencies. Precisely because of that, cryptocurrencies are experiencing growth among the global community. The central bank plans to compete with it by presenting a central bank digital currency or CBDC.

"If there is something private cryptocurrency can do, we must be able to create a product that would do that without any related risks in a safer format in fiat money backed by the government and issued by the central bank. This is basically what we did in the CBDC experiment," said an RBI official.

RBI launched its first retail digital bank (CBDC) pilot on December 1. Noted, as many as 8 banks have participated in the trial.

The plan is that RBI will conduct a pilot CBDC Digital Rupee in 13 cities in India. In line with the plan, the Indian financial authority is building technology infrastructure to support the smooth distribution of Digital Rupees.