Saw many threats from crypto; CBDC was the way forward: RBI DG Sankar

business-standard.com:

After observing an environment in which the evolution of private currencies posed a threat to investors, systems, and the economy, the Reserve Bank of India felt that the manner to deal with it was to provide a digital currency, Deputy Governor T. Rabi Sankar said.

His comments came two days after the central bank launched a pilot project for retail CBDC (central bank digital currency).

“We saw an environment where private currencies were evolving. We realised that this poses a threat to investors, systems, and the economy. We also realised that private currencies have shown that digitalising currency can possibly benefit,” Sankar said at an event organised by the Indian Bank’s Association.

“The way to deal with it was to provide a digital currency. If there is anything that a private cryptocurrency can do, we should be able to create a product that will do that without the associated risks in a safer format in fiat money backed by the government and issued by the central bank. This is essentially what we are doing in the CBDC experiments.” he said.

Sankar said to reporters at the sidelines of the event that the National Payments Corporation of India’s decision on Friday to extend the volume cap deadline for third-party application providers by two years had come at a time when implementing the previously envisaged deadline may have caused friction.

“We have seen it (the NPCI’s decision), it is fine. Competition takes time to evolve, we’ll have to wait for it to evolve. And at this stage of time, probably implementing that, would have cost some sort of friction in UPI,” he said.

The volume cap deadline which has now been pushed to December 31, 2024, was aimed at reducing the risk of concentration in the system and