Introduction of blockchain-based digital currency welcome move: Experts

Bankers fear that CBDC can eliminate the need of having bank account

VAIBHAV PARWAT

Aurangabad, Feb 2:

Union finance minister Nirmala Sitharaman’s proposal to introduce digital rupee, using blockchain and other technologies, is a welcome move. All such transactions can be tracked on the ledger leading to transparency and easy bookkeeping. But there is a fear that this currency can eliminate the need of having bank accounts, experts said.

Take load off traditional banking

“Digital currency with the backbone of block-chain will help us hold a powerful position in the global economy. It is expected that one will be able to do micro transactions, thus taking load off traditional banking networks. Though the details have not been revealed yet, it is expected that CBDC will make money transfer simpler with minimal fees. However, the technology is being researched by various countries and is presently in its primary form. RBI will also need a lot of research for CBDC,” said Mihir Jain, owner Cryptoassets.

Digital currency will save cost of printing

“The simultaneous shift to digital forms of payments will bring its own set of benefits. As transactions will go digital, the government will save on the cost of printing currencies. The transactions will be instantaneous and will be accessible in more remote areas. The use of digital currency can eliminate the need for having a bank account, debit card or credit card. All you need will be a digital wallet and make your bills using mobile phones, without using any cards,” said Rakesh Salunke, ex-banker.

Adverse impact on banking system

“Banks are not in favor of the introduction of digital currencies, because they would suffer the most if this system is adopted in the longer term. CBDC would need to coexist with and be complementary to the existing form of money. The possible adverse impact of digital money on bank funding, including the potential for destabilization, has been a concern for banks. Even the printing of notes might be eliminated in near future,” said Sundarkumar Yadav, retired bank manager.

CBDC raises a lot of questions

“The government is planning to introduce CBDC without any legislation. Instead of focusing on digital currency, the government should focus more attention on penetration of banking services to rural areas. CBDC raises a lot of questions about security and privacy, plus has the potential to disrupt existing financial institutions. The government should clarify whether it will be a parallel currency and will the government eliminate the currency notes,” said Devidas Tuljapurkar, general secretary UFBU.

What is digital rupee or CBDC?

The RBI defines CBDC as a legal tender issued by a central bank in a digital form. In simple words, it is a digital form of currency. A digital currency can never be torn, burnt, physically damaged or lost. The lifeline of a digital form of currency will be indefinite as compared to notes.