Page 10 - Bullion World Volume 02 Issue 12 December 2022

Bullion World | Volume 2 | Issue 12 | December 2022

CBDC and gold and jewellery trade in to anonymity but because they Conclusion
India keep the family tradition of The Bahamas, the first to roll out the
In a country where cash still buying from their trusted family CBDC, has adopted a three-tiered
dominates the gold and jewellery jeweller. anonymity approach. The first-tier
trade, it is natural to have some 3. Cash is still the king when it transactions of a small amount ($500
apprehensions about how the CBDC comes to buying gold & jewellery with an overall $1,500 a month) held
will impact the gold and jewellery at the retail level. As per WGC in the wallets are not under any kind
trade. A lot depends on the design estimates, cash accounted for of regulatory scrutiny. The next tier,
choice and the degree of anonymity about 67% of gold purchases up to $10,000 monthly, requires an
on the rollout of CBDC. The following in 2018 and 2019. However, it official ID. Transactions above that
points, however, merit consideration: will not be fair to assume that threshold require the highest degree
majority of the cash transactions of disclosure. China has also adopted
1. Currently, there are reporting in gold and jewellery happen a similar approach of 'controllable
requirements for high-value due to anonymity. A large anonymity".
transactions under the Income percentage of these transactions
Tax Act and PMLA under FATF are not reflective of unaccounted "ANONYMITY FOR SMALL
guidance. Gold transactions transactions. A GST-paid invoice VALUE AND TRACEABLE FOR
over Rupees two lacs require backs a bulk of cash purchases HIGH VALUE,"
furnishing the buyer's PAN card happening at large retail stores.
under rule 114B of the Income The cash purchases in the rural One key challenge for all Central
Tax Act. If the threshold limit for markets are on account of their Banks in implementing CBDC is
transaction disclosure remains cash earnings from agriculture, due to no precedence and the
the same, nothing changes which is tax-exempt in any case. requirement of extensive stakeholder
for gold and jewellery trading 4. As things stand now, the consultation and managing
transactions within this limit. Central Banks across the globe, expectations. A larger challenge
2. The size of the organised including RBI, seem to be in sync will be on the retail side, where
jewellery trade has been on the with the idea of implementing behavioral changes are required
rise consistently over the years. a CBDC, which is not intended from individual holders of the
The WGC report suggested that to eliminate physical cash CBDC. Like other failed schemes
the share of chain stores in the altogether. Unless there is an like the Gold Monetization Scheme,
jewellery trade rose to around extreme change in the thinking retail CBDC will fail unless the
35% in 2021. It is pertinent to process backed by a solid behavioral change requirements are
note that many buyers opting reason to choose the extreme addressed and managed through
to purchase from stand-alone design form, there is not likely to appropriate interventions. Without
stores are not transacting due be any negative impact on the these interventions, adoption will not
happen or will happen in a timeframe
gold market.
that makes the rollout ineffective at
Over the last decade, the retail 5. There is also the potential best and a complete failure at worst.
jewellery market has undergone impact of the CBDC on the Regarding India's gold trade, some
a notable shift, driven by cash flow cycle of the jewellers. degree of short-term impact on gold
changes in consumer behaviour The current gold movement and jewelry trading cannot be ruled
and government regulations mechanism between the foreign out based on the design and the
designed to encourage the exporter, nominated agency, and extent of the transactions covered
industry to become more the jeweller is based on a credit under CBDC. However, any kind
2
organized . system that could become wholly of transparency in the trade has
non-required?
long-term benefits for the overall
development of the trade. It will
2 https://www.gold.org/goldhub/research/jewellery-market-structure-india- facilitate achieving the objectives of
gold-market-series
gold's financialization.
3 Reserve Bank of India - Reports. https://rbi.org.in/scripts/
PublicationReportDetails.aspx?ID=1218

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