Digital money -Govt backing essential

Bracing for govt-backed digital money

Multiple governments worldwide are counting on Central Bank Digital Currencies (CBDCs) even as they made no bones about their mistrust of cryptocurrencies. India’s apex bank has already rolled out a beta of its digital currency though a full-fledged rollout of the country’s digital currency is expected in early 2023. 

Though CBDCs can be traded like cryptos, they are not based on public blockchains. They are likely to be on a private blockchain network controlled by central banks or governments, which will give banks a clearer picture of the money flow. China and Nigeria are some countries that have launched their CBDCs. In China, transactions made with the digital yuan (Chinese CBDC) crossed 100 billion yuan (around $14 billion) as of August-end, according to the People’s Bank of China. 

The US is also planning to launch a CBDC, which would be interoperable with CBDCs issued by central banks in other countries. Experts believe that CBDCs can help the Indian government in achieving financial inclusion as it doesn’t require users to own bank accounts. Similarly, it can speed up cross-border payments by reducing the number of intermediaries to process transactions as is the case with the banking system.