India to test national cryptocurrency

The Reserve Bank of India (RBI) has proposed that the country begin phased testing of a national cryptocurrency (CBDC). Representatives of the bank outlined the need for the introduction of the digital rupee in their recent report.

The main motivation for the launch of CBDC was the reliability and liquidity of payments, as well as the possibility of introducing it into the national financial system. The digital rupee will reduce the operating costs of cash management in India.

Representatives of the bank emphasized that they understand all the dangers, so India continues to consider cryptocurrencies as a significant risk for its citizens due to market volatility. It is also important that cryptocurrencies reduce the possibility of regulators' influence on the country’s monetary system and policies. The digital rupee will have the benefits of cryptocurrencies, but without the volatility and other negative characteristics of digital assets.

The Central Bank is considering testing two versions of the state digital currency — for citizens and for financial institutions. They have different goals and objectives, so it is possible that both CBDC options will appear in India.

Most Indians support the introduction of the digital rupee, as more than 115 million citizens already own cryptocurrencies. At the end of August, KuCoin cryptocurrency exchange published its report on the use of cryptocurrencies in India. The results showed that 54% of respondents plan to convert most of their capital into cryptocurrency, despite the strict taxation rules established by Indian law.