2024-09-23 19:04:21 : India is one of several countries actively working to incorporate central bank digital currencies (CBDC) into their financial systems. Over the weekend, the International Monetary Fund (IMF) proposed a framework aimed at promoting widespread CBDC adoption, known as REDI, which stands for Regulation, Education, Design and Deployment, and Incentives. In its latest report, the International Monetary Fund stated that many jurisdictions may consider CBDC as an important policy tool to enhance financial inclusion in the near future.
Learn about REDI
The International Monetary Fund report states that the CBDC ecosystem must be regulated to ensure financial security. The IMF mentioned the level of involvement of intermediaries to ensure that financial regulators in countries that are experimenting with CBDC are supervised. The report also recommends that CBDC must be given the same legal tender status as fiat currencies.
The report echoes insights from global financial experts, emphasizing that increasing awareness and understanding of CBDC is critical to promoting its adoption. It highlights the importance of communicating the benefits of CBDC, working with industry partners to enhance advocacy, and utilizing media channels to educate the public. These efforts are considered a key catalyst for widespread CBDC acceptance.
Regarding the design and deployment of CBDC, the IMF recommends that governments develop comprehensive strategies for users and lenders, including incentives to encourage participation. These incentives can take monetary and non-monetary forms and are designed to enhance engagement with CBDC.
“Integrating non-bank entities could significantly expand the reach and accessibility of CBDC; however, they may also introduce complexities to the regulatory framework. Effectively managing these challenges will require comprehensive regulatory alignment to align non-bank standards with existing financial The institution is aligned with the stringent security and operational requirements of the CBDC framework to ensure stability and security.”
The current global landscape of CBDC
A recent report by the Atlantic Council, an American think tank, shows that 134 countries, accounting for 98% of the global economy, are actively exploring digital versions of their national currencies. The report highlights that all G20 countries are currently studying CBDC, with a total of 44 countries currently piloting these initiatives.
Countries such as China, Russia, Nigeria and India are actively conducting advanced trials of central bank digital currencies (CBDC) in retail and wholesale environments.
About eRupee CBDC in India
The eRupee CBDC retail pilot was launched in December 2022 and aims to facilitate peer-to-peer transactions. Recently, Reserve Bank of India Governor Shaktikanta Das announced that eRupee has attracted 5 million users in its retail pilot phase.
Ahead of the International Monetary Fund’s report, the Reserve Bank of India has begun incentivizing CBDC users to participate in trials. In January 2024, several banks including HDFC, Kotak Mahindra Bank, Axis Bank, Canara Bank and IDFC First Bank started disbursing funds related to employee welfare schemes directly into employees’ CBDC wallets instead of salary accounts . This initiative aims to promote the adoption and use of eRupee.
Das said eRupee is positioned as a means of internationalizing Indian fiat currencies. The Reserve Bank of India is actively working to ensure that eRupee is compatible with UPI QR codes, capable of handling offline transactions, and provides financial privacy to users.
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