India Reserve Bank confirms exploration of digital currency
The rising costs of managing metal and paper money have India's Reserve Bank exploring digital.
Speculation around a central bank digital currency has been part of India's fraught relationship with cryptocurrency. It's been suggested that the strong discouragement of cryptocurrencies in India will give way to wide use of central bank digital currency and a lively digital asset scene, even as cryptocurrencies remain discouraged.
It's widely known that India's Reserve Bank has been investigating the potential of a national digital currency, but new reports from India's Economic Times suggest that it's moved forward again, from consideration of whether digital currencies might work to consideration of how they will work.
The rising costs of managing metal and paper money, or polymer in Australia's case, or that fabric-paper stuff in the case of US dollars, are causing a lot of countries to explore the potential of digitisation, the report says.
For the financial year of 2018, the report continues, India spent Rs 636 crore (about USD$90 million) on the printing of money and is keen for a more cost-effective alternative.
At the same time, it also cites the quickly changing nature of the payments industry and the growing area of other digital tokens, as reasons to start getting involved. The reserve bank might justifiably be scared of people leapfrogging to unofficial currencies if it doesn't introduce a more effective digital payments scheme of its own.
Digital payments are still relatively uncommon in India, with little penetration of point of sale terminals and only US$10 billion of mobile digital payments in the year of 2018 according to Credit Suisse. This is expected to grow quickly though.
"Digital payments (in India) currently aggregate less than USD 200 billion, of which mobile is still at just USD 10 billion in financial year (FY) 2018 E (estimated)," Credit Suisse says. "We estimate that the total digital payment market in India will grow to USD 1 trillion by FY23E led by the growth in mobile payments."
With a digital payments revolution, entirely separate to cryptocurrency, racing around India in the coming years it might be important that the reserve bank is in a position to offer the best "brand of currency" for its customers.
It's a more ambitious schedule than most other countries, but it's quite in keeping for a country that's generally been moving towards large scale blockchain deployments on a fairly tight schedule.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VET, XLM, BTC, ADA