RBI working towards phased CBDC launch

The Reserve Bank of India revealed its plans for a phased introduction of central bank digital currency (CBDC), in a “concept note” published on October 7.

“RBI is currently engaged in working towards a phased implementation strategy, going step by step through various stages of pilots followed by the final launch,” the central bank says in the note.

The RBI is planning to introduce an account-based wholesale CBDC and a token-based retail CBDC. The document says the tokenised approach yields a form of digital currency that is more similar to banknotes – whoever holds the token is presumed to own them.

The tokenised approach also allows the RBI to use a two-tier model for retail CBDC, where commercial banks operate the user interface. By contrast, the RBI suggests an account-based model may be more suitable for wholesale CBDC, which would be used only by a select group of financial institutions.

Other design choices, such as security technology and the choice of ledgers, will be worked out during a series of pilots. The RBI now plans to build and test prototype CBDCs, before scaling these up to carry out a large-scale pilot.

“CBDC across the world is in conceptual, development, or at pilot stages,” the RBI says. “Therefore, in the absence of a precedence, extensive stakeholder consultation along with iterative technology design must take place to develop a solution that meets the requirements.”