“There is a strong impetus for RBI to launch CBDC… cash is going to coexist with CBDC,” he said.
The former RBI governor also said that privacy will also be a big issue when RBI launches digital currency.
Recently, RBI Deputy Governor T Rabi Shankar had said that the central bank is working on a phased implementation strategy for its digital currency and is in the process of launching it in the wholesale and retail sectors in the near future.
He also said that the idea of Central Bank Digital Currency (CBDC) is mature, and many central banks of the world are working in this direction.
Subbarao said that there is also the issue of financial instability, noting that if the RBI launches a CBDC, the central bank’s control over the money supply will be weakened.
Responding to a question on cryptocurrencies, Subbarao cautioned that cryptocurrencies could become a medium to withdraw money from countries like India and China.
“There is certainly a case for regulating cryptocurrencies. These cryptocurrency assets can be used for money laundering,” he said.
However, Subbarao said that cryptocurrencies are here to stay as a speculative asset.
In India, there is a high level Inter-Ministerial Committee constituted by? Ministry of Finance has examined the policy and legal framework, and recommended introducing CBDCs as a digital form of digital currency in the country.
Cryptocurrencies are digital or virtual currencies in which encryption techniques are used to regulate the generation of their units and to verify the transfer of money that operates independently of a central bank.