Shaktikanta Das, the governor of the Reserve Bank of India, had so far maintained that India is not ready for a digital currency, but suddenly he has announced that from November 1, Central Bank Digital Currency (CBDC) will be in use. These will be of two types: CBDC (Wholesale) and CBDC (Retail). CBDC (W) is for interbank and intra-bank RBI/treasury transactions. In 2 days, there were Rs 275 Crore transactions. Retail will start soon. This is supposed to be a pilot phase. Only three public sector banks have been authorized to deal in CBDC, while the number of private banks authorised to do the same is six!
Though CBDC is completely different from the cryptocurrency used for gambling, terrorist transactions and Hawala, CBDC is the digital rupee with the same value as the rupee. Already applications like Yono SBI, Paytm, Google Pay etc are available for online digital transactions without having to deal with a digital rupee.
Then why suddenly do we need a digital Rupee? Some are saying India has become number one in the world by introducing CBDC even before China and the G20 countries. Should we be number one to join in the wrong things? In the Human Development Index, Happiness Index and Press Freedom Index we are at the bottom among the countries in this world.
There are many questions that the RBI and the Union Govt must answer.
- How can you introduce Digital Currency without amending the RBI Act? How much Digital Currency will be authorized? Who does that? Will its value always remain the same?
- How safe is the technology? We have everyday complaints with the UPI platforms. Experts say anything digital can be hacked. In 2010, a person hacked cryptocurrency. The US and the CIA were unable to hack the blockchains and get details. So how safe is CBDC?
- With almost one-third illiterate population, how can you introduce a currency that most can’t use? Only10% rich and 20% middle class will be comfortable using it. What about the rest 70%?
- Is this Govt which has been pushing digitization based on the cashless alliance supported by the World Economic Forum going to remove all paper currencies over a period of time? If so, who will be affected? Is it not the poor?
- Will it help hoarders to keep their money in digital form? Even though RBI may know who has it, RBI cannot make it public. It is not even ready to disclose the written-off account borrowers who have booked in the name of an oath of surety.?
- When no major country except small countries like the Bahamas has tried digital currency and allowed crypto, why India is in a hurry to switch over to CBDC?
- RBI itself has given details of the dangers. What made it change its stand? Arm twisting?
- The Govt announced that it will charge a 30% tax on cryptocurrencies; how much it has collected as tax? Is it not legalising an illegal transaction? Will it not lead to a lot of loss for the investors over a period of time?
- What will happen to the foreign exchange? How many countries are ready for CBDC? Will it not lead to a foreign exchange crisis over a period of time?
- Finally, is the digital rupee going to be used by candidates for distributing money to the voters in elections, while the election commission will watch over helplessly?
The rush and secrecy in announcing the digital rupee lead to many more questions that the union government represented by the Finance Minister and RBI must answer. We need answers from both the government and the RBI immediately.
Thomas Franco is the former General Secretary of All India Bank Officers’ Confederation and a Steering Committee Member at the Global Labour University.
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