Reserve Bank of India (RBI) in Talks with Other Central Banks to Promote Digital Rupee for Cross-border Payments
Reserve Bank of India Governor Shaktikanta Das acknowledged that the country is moving towards CBDC adoption amid a weaker dollar.
With 19 of the G20 countries in the advanced stage of developing a Central Bank Digital Currency (CBDC), the Republic of India, the most populous country in the world, is working toward the same goal. According to another a report By The Economist Times The Reserve Bank of India (RBI) is currently in discussions with more than 18 global central banks on how to use the digital rupee for cross-border payments. The South Asian country has seen a huge growth in its economy in the past few years fueled by the adoption of modern technology.
Indian market and the digital rupee
The report notes that the RBI Governor, Shaktikanta Das, has mentioned several times the importance of the foreign trade infrastructure of the digital rupee. India already hosts billions of cross-border payments from its citizens working abroad. However, it should be noted that most of the need for third parties in cross-border payments has decreased significantly since the inception of bitcoins and other crypto assets. Moreover, the Reserve Bank of India expects the digital rupee to reach 1 million users soon.
But cross-border payments will also become much faster, smoother and more cost-effective. This is another area where a lot of attention should be paid. We are in constant dialogue with other central banks that have introduced or are introducing CBDCs,” Shaktikanta noted during a speech in London recently.
With the US dollar supply turning into a clamor for merchants seeking to import goods in most countries, Shaktikanta highlighted that the digital rupee will help streamline the supply chain. Moreover, more countries will have digital rupees in their Vostro accounts to facilitate seamless cross-border payments with less friction.
“In India, we don’t have a shortage of dollars, but in some other markets, because of a shortage of dollars, they can’t do imports,” Shaktikanta added.
The bigger picture
India has already joined other countries including Russia, China, Brazil and South Africa to wean itself off dependence on the US dollar as the global reserve currency. Undeniably, US regulators are already feeling the heat for more countries abandoning the dollar as a reserve currency. Moreover, inflation has been on the rise despite the Fed’s interest rate hikes in the past 10 months.
Undeniably, the Reserve Bank of India intends to counter the growing use of Bitcoin among other crypto-assets as a means of quick payment.
However, the Indian government has tried desperately to ban the use of crypto assets to no avail in the past few years. In response, the Indian government has imposed a strict tax on uses of cryptocurrency in an effort to discourage its use.
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