How the RBI's digital currency can help economy
SummaryMore than 50 central banks are planning to issue CBDCs worldwide.
Readers of a certain age group might remember Ramon Bonus Stamps. It was a hugely successful loyalty programme in the late 1960s. You got some stamps on every purchase from participating retailers, and could redeem them for a gift after accumulating a certain quantity. Some people sneakily exchanged them for real cash too. At its peak, it is said that more of these bonus stamps were printed than by the postal department. Its success spawned enterprising businesses that started printing these stamps for circulation, which then threatened to become a parallel currency. A deluge of fakes soon led to the scheme shutting down. Of course, subsequent technologies like holograms and later QR-code-based authentication could deter counterfeiters. Not surprisingly, loyalty programmes have not only survived, but flourished. You can earn and accumulate points on purchases of almost everything, and then redeem these points for more merchandise or donate them to designated charities. The loyalty of the customer is now earned not only on brands or products, but even on baskets of goods or aggregate purchases by the reward of points. These points are sometimes transferable, even exchangeable between big retailers. Typically, you store these loyalty points in digital wallets and can also top up your balance with ‘real money’. Everyone from Amazon and Airtel to Ola and Uber offers a wallet. But what is in this wallet cannot become a parallel currency, like the Ramon Bonus Stamps of yore. This is because it would be deemed illegal, as it has no official state authorization (or fiat). Even otherwise, its acceptability is going to be limited.