crypto strategy

RBI’s E-Rupee could be a long chase with limited upside

According to the RBI’s concept note, a wholesale CBDC – for interbank transfers and wholesale transactions – has the “potential to transform the settlement system”. Such an instrument would make financial transactions on the capital markets more efficient and safer. It would also help counterparties avoid the need for collateral to manage settlement risk.

“Indeed, wholesale CBDCs could make central bank money programmable, to support automation and mitigate risk,” the note says.

According to Garg, however, existing systems for wholesale transactions are already adequate. “Settlement today – whether actual gross transfers or otherwise – is a flawless and flawless settlement taking place today and also being done on the books of the RBI.”

But Sharat Chandra, vice president of research and strategy at EarthID and a blockchain expert, said a wholesale CBDC would be a necessary addition from a cross-border payments perspective. “In the current system, you have counterparty settlement risk. But when two sovereign nations exchange goods and services with their own sovereign currency, it may not be denominated in dollars.

While blockchains may work as a technology for the wholesale CBDC, they are unlikely to succeed for the retail version, he said. “Blockchains are not mature enough or scalable enough to support this.”

One of the RBI’s stated goals for offering a retail CBDC is to provide people with the “same digital currency trading experience, without any of the risk associated with private cryptocurrencies,” the concept note states.

Reducing the costs associated with handling physical money, improving financial inclusion, exploring cross-border payments through the CBDC, and supporting innovation in payments are also among the reasons cited by the RBI.

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