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MUMBAI : The risk of cyber frauds is one of the major challenges to rolling out a central bank digital currency, requiring systems that thwart such malafide attempts, Reserve Bank of India (RBI) governor Shaktikanta Das said on Wednesday

“(The) main concern comes from the angle of cyber security and the possibility of digital frauds so we have to be very careful about that. A few years ago, we had major concerns around fake Indian currency notes. Similar things can also happen when you are launching central bank digital currency (CBDC)," Das told reporters at a post-policy press conference.

Das pointed out that even in the CBDC universe, one has to ensure cyber security and take preemptive steps to prevent any kind of fraud.

“There will be attempts so we need to have a robust system to present such things," he added.

A central bank digital currency is a sovereign currency in an electronic form and would appear as liability (currency in circulation) on a central bank’s balance sheet. A 2021 survey by the Bank for International Settlements (BIS) found that 86% of central banks were actively researching the potential for CBDCs, 60% were experimenting with the technology and 14% were deploying pilot projects.

CBDCs can be designed for use either among financial intermediaries only (wholesale CBDCs) or by the wider economy (retail CBDCs), according to BIS Annual Economic Report 2021. On Wednesday, RBI deputy governor T Rabi Sankar said that the central bank has already made significant progress on the wholesale component of the CBDC, while the retail component will take longer.

“As we have said before, work is on on two kinds of CBDCs – one is wholesale account-based and the other is retail. Much progress has already been made on the wholesale account-based one. The retail-based one is a little more complicated and will take longer. Whichever is ready first will be released for a pilot," Sankar said.

In July, Sankar had said that the central bank was working towards a phased implementation strategy for a central bank digital currency (CBDC) and examining use cases to ensure there is little or no disruption. RBI, he had said, was examining whether CBDCs should be used in retail payments or also in wholesale payments; whether it should be a distributed ledger or a centralized ledger; whether direct issuance by the RBI or through banks and the degree of anonymity it would provide.

Finance minister Nirmala Sitharaman had told the Lok Sabha that there was no proposal to recognize Bitcoin as a currency, PTI reported on 29 November. In a separate reply, minister of state for finance Pankaj Chaudhary said that the government has received a proposal from RBI in October to amend the Reserve Bank of India Act, 1934 and enhance the scope of the definition of ‘bank note’ to include currency in digital form.

While there is still no clarity on the fate of cryptocurrencies in India, reports suggest that the union government plans to regulate and not ban them. Mint reported on 3 December that the government has decided to bring cryptocurrencies under the regulatory ambit of the Securities and Exchange Board of India (Sebi).

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