Page 9 - Bullion World Volume 02 Issue 12 December 2022

Bullion World | Volume 2 | Issue 12 | December 2022

of issuance and management of
currency The purpose of introducing CBDC includes
• Nurturing financial inclusion improving efficiency in the financial system,
• Bringing efficiencies in the not falling behind leading economies when the
payment and settlement system
• Facilitating cross-border trade Indian fintech stack is already world-leading,
• Efficiency in cross-border and continuing, while keeping these goals in
transactions/ settlement mind, to retain the trust of financial markets and
• Providing all the possible
benefits of physical notes the public in money and the monetary system.
without the associated risks
relating to their possession
• Ease of operations and user
experience at par with private
cryptocurrencies, with the
sovereign guarantee and
eliminating the risks to the
stability of the country's financial
structure.

Key design choices
• Wholesale CBDC is meant for
banks and Financial Institutions Prof. Arvind Sahay Mr Harish Chopra
to settle interbank transfers and
related wholesale transactions. account-based system. Under his holding in a bank to earn
Retail CBDC is targeted at a token-based system, the interest.
non-financial consumers CBDC is a digital token and • The key design feature, the
& businesses and can be bearer instrument. The holder of most significant trade-off
categorized as the electronic the token is the owner, just like for the authorities to design,
version of cash. When should banknotes. The account-based is the degree of anonymity
which one be introduced at system is an online system and ownership. The physical
scale? What should be the managed by an intermediary and banknotes today ensure
decision criteria? is more suitable for wholesale absolute anonymity, which is
• The CGDC can be directly CBDC, whereas the former is impossible to achieve in any
managed where RBI manages for retail. Token-based systems form of CBDCs as the digital
its issuance, account keeping, would have greater anonymity transaction will always leave a
and transaction verification. and, from a behavioral trail. It depends on how much
Alternatively, it can be an standpoint, greater acceptance the authorities want to control
indirect management system at among individuals. and the objective for the same.
par with the present system of • Instrument design can be It is also possible to stipulate
banknotes management, where remunerated where the holder that if the money is not spent by
banks manage the distribution, earns interest like a bank a specific time, it will become
KYC/ AML/ CFT, account deposit. A non-remunerated worthless – decreasing the level
management, and transaction design replicates the present of ownership by the person
monitoring. cash system where the holder holding the CBDC; this could be
• Another design choice is gets the interest only when he problematic.
between a token-based or an issues instructions to deposit

1 RBI CBDC: Digital Rupee pilot starts from November 1; SBI, HDFC, 7 ....
https://economictimes.indiatimes.com/wealth/save/rbi-cbdc-digital-rupee-pilot-to-start-
from-november-1-sbi-hdfc-7-other-banks-to-participate/articleshow/95205659.cms

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