30 August 2021
India has joined the ranks of countries who are countering the opportunity and threat of decentralized cryptocurrencies by experimenting with state-issued digital assets.
India’s national bank, the Reserve Bank of India, has developed a phased implementation strategy for a central bank digital currency, or CBDC. According to RBI governor Shaktikanta Das, the bank could launch trial programs by the end of 2021.
CBDCs are digital currencies issued by national banks. They are not true cryptocurrencies, but digital versions of fiat currencies. However, they can deliver some of the benefits of cryptocurrencies, including fast money transfers and reduced fees.
According to the 2021 Crypto Adoption Index from Chainalysis, India has the second-highest rate of cryptocurrency use in the world, following only Vietnam. Chainalysis says cryptocurrency investments increased from €783 million in April 2020 to about €5.6 billion in May 2021. India has nearly 1.4 billion residents.
Cryptocurrencies are popular in developing countries because they make it possible for people working in other countries to send cash to their families quickly and inexpensively compared to bank wire transfers and other mechanisms. Crypto can also serve as a safeguard for cash in countries whose fiat currency is plagued by high rates of inflation.
Brazil, Sweden, and Jamaica are reportedly among other countries preparing CBDCs for testing.
The central banks of Antigua and Barbuda, the Bahamas, Grenada, Saint Kitts and Nevis, and Saint Lucia have issued CBDCs. Among the countries reportedly involved in pilot programs are Anguilla, China, Dominica, Hong Kong, Lithuania, Montserrat, Saint Vincent and the Grenadines, Saudi Arabia, Singapore, South Korea, Sweden, Thailand, Ukraine, and United Arab Emirates.