Proof of concept refers to an exercise in which work is focused on determining whether an idea can be turned into a reality, or to verify if the idea will function as envisioned.
Reserve Bank on Friday said it is looking at the pros and cons of introducing a virtual currency in the country and it will adopt a graded approach for launching the central bank digital currency. Finance minister Nirmala Sitharaman while presenting the Budget 2022-23 had announced that the central bank will launch an Indian digital currency.
The introduction of CBDC (Central Bank Digital Currency) was announced in the Union Budget 2022-23 and an appropriate amendment to the RBI Act, 1934 has been included in the Finance Bill, 2022, RBI said in its annual report for 2021-22 released on Friday. The Finance Bill, 2022 has been enacted, providing a legal framework for the launch of CBDC, it said.
“The Reserve Bank is engaged in the introduction of a central bank digital currency in India. The design of CBDC needs to be in conformity with the stated objectives of monetary policy, financial stability and efficient operations of currency and payment systems,” it said in the report. The Reserve Bank has been looking at the pros and cons of introduction of CBDC in India, it said, adding that it proposes to adopt a graded approach to introduction of CBDC, going step by step through stages of proof of concept, pilots and the launch.
Proof of concept refers to an exercise in which work is focused on determining whether an idea can be turned into a reality, or to verify if the idea will function as envisioned. RBI said the design of CBDC needs to be in conformity with the “stated objectives of monetary policy, financial stability” and “efficient operations of currency and payment systems”.
Accordingly, the appropriate design elements of CBDCs that could be implemented with little or no disruption are under examination, said the report. After the budget announcement on February 1, RBI Governor Shaktikanta Das had said that the Reserve Bank does not want to rush and is carefully examining all aspects before the introduction of the CBDC.
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