Amid rising concerns over the Indian government’s proposal to ban cryptocurrencies, Infosys cofounder Nandan Nilekani said that ‘digital rupee’ might be introduced in India in the next 2-3 years.
Backing the cryptocurrencies in India, Nilekani during a conversation with Angel investor Balaji Srinivasan on audio-based platform Clubhouse, said that people should be allowed to have some crypto. “Crypto as a transaction medium will not work as fast as UPI, which is targeting a billion transactions a day. But crypto has enormous capital,” he said.
Earlier, a report by Reuters suggested that Indian government might also be looking for an alternative to Bitcoin. Nilekani believes that the government is hinting at a Central Bank Digital Currency (CDBC) such as a digital rupee.
What Is CBDC?
A panel constituted by the former Union Finance Minister Arun Jaitley proposed the concept of central bank digital currency. The committee stated that CDBC will be digital form of fiat money.
“The concept of electronic central bank money is not new and has existed for a very long time, in the form of reserves deposited by commercial banks and certain other financial institutions at the central bank,” the committee noted.
What Is Digital Rupee?
Digital rupee, as the name suggests, is a form of digital currency that might be introduced in the future by the Indian government as a replacement to other crypto forms.
Unlike Bitcoin and other cryptocurrencies which are based on peer-to-peer network, digital rupee will be monitored within a framework by the Reserve Bank of India.
Will Digital Rupee Replace Private Cryptocurrencies?
Trading, mining and holding cryptocurrency could soon be illegal in India as the Indian government is proposing a new Bill that could ban all transactions related to cryptocurrencies.
According to a report by Reuters, the new Bill proposes to criminalise possession, issuance, mining, trading and transferring crypto-assets including Bitcoin, Dogecoin and other cryptocurrencies.
The report further suggests that Indian government might be looking for other alternatives to cryptocurrencies hinting towards the introduction of digital rupee. “At the same time, the central bank has been working on launching its own digital currency, a step the government’s Bill will also encourage,” a government official told Reuters.
Countries Might Issue Their Own Digital Currencies
Several media reports suggests that China is preparing to introduce digital yuan. While America and Japan are also considering to introduce digital currency. In this context, Nilekani said that Reserve Bank of India might bring Central Bank Digital Currency (CBDC) soon, “as it is just a matter of time”.