Cybersecurity and the risk of cyber fraud pose challenges to the successful rollout of a central bank digital currency (CBDC), Reserve Bank of India (RBI) Governor Shaktikanta Das said on Wednesday (Dec. 8), per a LiveMint report.
“[The] main concern comes from the angle of cyber security and the possibility of digital frauds so we have to be very careful about that. A few years ago, we had major concerns around fake Indian currency notes. Similar things can also happen when you are launching a central bank digital currency,” Das reportedly said after a post-policy press conference.
Despite the concerns raised, RBI Deputy Governor T Rabi Sankar said that significant progress had been made on the wholesale component of the CBDC, but issues with the retail component had slowed progress.
“As we have said before, work is on on two kinds of CBDCs — one is wholesale account-based and the other is retail. Much progress has already been made on the wholesale account-based one. The retail-based one is a little more complicated and will take longer. Whichever is ready first will be released for a pilot,” Sankar reportedly said.
Learn more: BIS: 20 Pct Of Population Will Access CBDCs By 2024
A 2021 study by the Bank for International Settlements (BIS) found that central banks collectively representing a fifth of the global population will likely issue a general-purpose CBDC by 2024, adding that CBDCs will be available for 20% of the world’s population in the next three years.
The report also revealed that emerging markets and developing economies are strong drivers of cryptocurrency as they look for ways to expand financial inclusion, and in the past four years, 86% of central banks have been actively doing some kind of work on CBDCs, while 60% of central banks are currently doing experiments or proof of concept.
When it comes to cryptocurrency, however, India has taken no concrete steps to stop the use of the virtual currencies, despite growing concerns among lawmakers and regulators in recent years.
Read more: India Likely To Recognize Crypto As Tradable Asset Class In Upcoming Bill
In August, India’s Finance Minister Nirmala Sitharaman said the government was preparing to introduce a new cryptocurrency bill which is still awaiting Cabinet approval. Under the proposed bill, cryptocurrencies will not be accepted as legal tender although people can experiment with blockchain technologies. There might also be a provision that offers an exit option for individuals who have already invested in the digital currencies.
But that proposed legislation, Reuters recently reported, would ban the use of cryptocurrencies as a method of payment in the country and includes a mandate for people who infringe the law to be arrested without a warrant and held without bail.
Digital Payments Growing at Record Highs
Last month, PYMNTS reported that digital payments in India are growing by leaps and bounds, and banknotes continue to grow five years after the country demonetized banknotes of 500 and 1,000 rupees (about $7 and $13).
See: Banknotes, Digital Payments up in India Five Years After Demonetization
While banknotes made up the largest part of currency methods in the last year, digital payments via cards, net banking and the government’s real-time payments system Unified Payments Interface (UPI) increased.
Related news: FinTechs to Have Greater Presence in Charting India’s Digital Path
To further boost financial inclusion through UPI, the RBI announced the introduction of UPI-based payment products for feature phones in its monetary policy statement Wednesday (Dec. 8), and a new “on-device” wallet for small value UPI transactions, according to a report from Business Insider India.
The aim of the new measures is to help ease the process of small value UPI transactions, and given that there are no native UPI apps or features through which feature phone users can make UPI transactions, the measures can also help boost the use of the UPI payment system through feature phones which have 550 million users in India, the report said.
Read also: India’s UPI Hits 1.34B in June Transaction Volumes
UPI had reported a monthly volume of more than 2 billion transactions earlier this year, an increase from the 1.34 billion transaction volume it hit in June 2020.
In January, the Reserve Bank of India said it was launching a Digital Payments Index to keep tabs on growth in cashless transactions, with March 2018 as the base period. As PYMNTS reported, March 2020 and 2019 data showed a respective 207.8 and 153.4 growth measurement.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More