The Reserve Bank of India predicted the displacement of private cryptocurrencies CBDC

CBDCs are capable of completely replacing private virtual currencies, including bitcoin. This was stated by Deputy Governor of the Reserve Bank of India T. Rabi Sankar, writes Outlook.

The comment came after the Ministry of Finance announced a report on cryptocurrencies.

T. Rabi Sankar spoke about the "methodical work" of the regulator on the introduction of the digital rupee. CBDC will provide better management of the national currency, reduce the risks of settlements in the interbank system, and become the best alternative in cross-border payments, he added.

The official stressed that the Central Bank is approaching this initiative “weighedly”, given the possible negative effect on the banking system through limiting the ability to attract deposits by credit institutions and their role in the implementation of monetary policy.

“We will go through a proof-of-concept process, followed by pilot projects and phased implementation. We intend to learn along the way. The digital journey can continue indefinitely,” he explained.

Sankar did not agree with the position of the Central Bank of other countries that advocate the adoption of stablecoins.

“I am sure that now [after the collapse of Terra USD] they understand the difference between money and currency,” the official said.

The Deputy Governor of the Central Bank called on the IMF to take the lead in determining the position on CBDCs and cryptocurrencies.

The regulator is a consistent opponent of digital assets. In 2018, the Central Bank banned banks and financial organizations from providing services to companies working with cryptocurrencies. In March 2020, the Supreme Court overturned the restriction.

In May 2021, it became known that the Central Bank of the country asked banks to terminate relations with bitcoin exchanges. After that, the regulator called on controlled institutions not to refer to the repealed directive banning transactions with cryptocurrencies.