RBI Wants To Enhance Scope Of Digital Currency Under Definition Of Bank Note, Proposes Amendment To Law

The RBI had introduced the proposal of Central Bank Digital Currency in October seeking to amend the Reserve Bank of India Act, 1934

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New Delhi: The central government on Monday informed Parliament that it has received a proposal from the Reserve Bank of India (RBI) last month to enhance the scope of digital currency under the definition of ‘bank note’. 

The RBI had introduced the proposal of Central Bank Digital Currency (CBDC) in October seeking to amend the Reserve Bank of India Act, 1934. 
The term CBDC refers to the virtual form of a fiat currency. A CBDC is an electronic record or digital token of a country’s official currency, for example, rupee in India.

On the very first of the winter session in Parliament, the Ministry of Finance in a written reply said, “Introduction of CBDC has the potential to provide significant benefits, such as reduced dependency on cash, higher seigniorage due to lower transaction costs, reduced settlement risk.”

It would also possibly lead to a more robust, efficient, trusted, regulated, and legal tender-based payments option, the ministry said. However, the ministry noted that the “there are also associated risks which need to be carefully evaluated against the potential benefits.”

Earlier this month, Prime Minister Narendra Modi had chaired a high-level meeting on cryptocurrencies with the RBI officials, Sebi, and the Finance Ministry. 

The government received questions on the ‘ban’ of cryptocurrencies in India and the RBI’s plan to introduce a legal digital currency. 

Finance Minister Nirmala Sitharaman on Monday in a reply to the question in Parliament said that the government has no proposal to recognise Bitcoin as a currency in the country. She also informed the House that the government does not collect data on Bitcoin transactions.

Earlier, the central government had said that they would table a Bill banning cryptocurrencies in the country. The Bill, if passed, will frame guidelines to regulate cryptocurrencies in India. The Bill is aimed at prohibiting crypto coins, while providing a framework for the creation of an official digital currency to be issued by the RBI.