Reserve Bank of India’s digital currency pilot in the retail segment will have components backed by blockchain technology and will have some common features with physical cash, Finance Minister Pankaj Chaudhary said. told Lok Sabha on Monday.
CBDC, a digital form of banknotes issued by the central bank, is being trialed in India. RBI launched a retail segment pilot for a private group of participating customers and merchants on December 1st.
The federal minister did not elaborate further on the use of blockchain technology in the CBDC, but added that the ‘digital rupee’, dubbed the CBDC pilot, will have some features of physical currency.
“It (the ‘digital rupee’) is issued in the same denomination as banknotes and coins…provides the features of physical cash such as trust, security and finality of settlement,” a government official said. the statement said.
The minister added that CBDC does not earn interest but can be converted into bank deposits.
As for the use of wholesale CBDCs, a trial began on November 1 to settle secondary market trades in government securities. The minister told the House of Commons that it is expected to make the interbank market more efficient.
“Settlement in central bank money will reduce transaction costs by pre-empting the need for payment assurance infrastructure and collateral to mitigate settlement risk,” he noted.
On October 7th of this year, RBI released a concept note on CBDC. This note discusses key considerations such as technology and design choices, possible use cases, and publishing mechanisms.
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