Page 8 - Bullion World Volume 02 Issue 12 December 2022

Bullion World | Volume 2 | Issue 12 | December 2022

Central Bank Digital Currency (CBDC)

and Gold Trade in India

Prof. Arvind Sahay, Chairperson, IGPC @IIM Ahmedabad

Mr Harish Chopra, Vice President & Head, IGPC @ IIM Ahmedabad
(The view shared here are Author's own)

In a country where cash still dominates the gold clearly spelled out, the Indian digital
currency (e₹) will complement the
and jewellery trade, it is natural to have some currently available forms of money,
apprehensions about how the CBDC will impact implying that the e₹ is in no way, at
the gold and jewellery trade. A lot depends on the least at this time, intended to replace

design choice and the degree of anonymity on the the existing forms of currency
rollout of CBDC. and is positioned as a convenient
alternative to the physical notes.

Background and UPI have been game changers RBI envisaged a phased
Public interest and safeguarding in many ways. The changing implementation of e₹ starting with
public trust in money remain the pattern of spending and, to some the pilot runs of wholesale e₹,
topmost priority of all the Central extent, the growing attention followed by the pilot run of retail e₹
Banks while rolling out CBDC towards private decentralized before the final launch. In a country
projects. Being able to maintain cryptocurrencies and their likely that has seen demonetisation of
trust in the financial system requires impact on a country's monetary currency notes not so long ago, any
that the Central bank have the right policies and financial stability has such initiatives by the regulatory
degree of influence and direction, motivated many Central Banks authorities to make money that can
creating powers on the currency across the globe to start exploring be configured can be seen with
and the monetary system. In the issuance of CBDCs. While the some skepticism or trepidation.
recent times, perhaps, no other deliberations around CBDCs were Through the concept paper, RBI
item has shown the possibility of started way back in 2014, it has has ensured that the rollout of e₹
not only enhancing the influence, gained momentum in the last couple will not disrupt the existing payment
directionality, and visibility but also of years. The purpose of introducing system. RBI has also clarified that
increasing the efficiency of the CBDC includes improving efficiency the sovereignty of the currency will
use of money as crypto – or, more in the financial system, not falling not be impacted in any manner while
specifically, a form of it now known behind leading economies when changing the currency shape from
as Central Bank Digital currency the Indian fintech stack is already physical to digital. An offline feature
(CBDC) – a form of digital money world-leading, and continuing, while is proposed that will help smooth and
issued by a Central Bank. keeping these goals in mind, to uninterrupted operations even in the
retain the trust of financial markets remotest locations.
Technology innovations in payment and the public in money and the
solutions have always been one of monetary system. Objectives
the thrust areas of Central Banks In line with the guiding principles laid
around the globe. RTGS, NEFT, or The Reserve Bank of India released down by the International Monetary
instant payment solutions like IMPS its concept note in October 2022. As Fund (IMF) and Bank of International

Settlement (BIS), RBI's CBDC is
aimed to achieve the following broad
CBDC is aimed to complement, rather than replace, current forms of money
and is envisaged to provide an additional payment avenue to users, not to objectives:
replace the existing payment systems. • Reduction in operational costs
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