RBI considers launching own virtual coins to tackle cryptocurrencies, minting costs

RBI considers launching own virtual coins to tackle cryptocurrencies, minting costs
Photo Credit: Photo Credit: Shah Junaid/VCCircle
30 Aug, 2018

The Reserve Bank of India has formed an inter-departmental group to explore the workability of a rupee-backed digital currency, the RBI said in its 2017-18 annual report.

The RBI said central banks around the world are considering introducing fiat digital currencies, thanks to rapid changes in the payments industry, emergence of private digital tokens, rising costs of managing fiat money, and more.

For example, the total cost of printing paper notes in the country stood at Rs 636 crore for the financial year 2017-18, going by a response to an RTI (right to information) application by India Today.  

Besides, a digital currency backed by an asset like gold or fiat money could be more stable than cryptocurrencies, which are volatile.

The RBI seems wary of privately issued cryptocurrency. It said, “Though cryptocurrency may not currently pose systemic risks, its increasing popularity leading to price bubbles raises serious concerns for consumer and investor protection, and market integrity.”

Also, the central bank said, “The cryptocurrency ecosystem may affect the payment and settlement system which could, in turn, influence the transmission of monetary policy. Furthermore, being stored in digital/electronic media – electronic wallets – cryptocurrency is prone to hacking and operational risk.”

Last month, the Supreme Court refused to grant interim relief from RBI’s banking restriction on cryptocurrencies.

The RBI had issued a circular in April to all banks and financial institutions banning them from providing any service to entities that deal with cryptocurrencies.