Amend RBI Act

Even as details are awaited of what legislative action is in store for private cryptocurrencies, the progress on a central bank digital currency being planned by the Reserve Bank of India (RBI) will be crucial this Parliament session. In a written reply to a question in the Lok Sabha on Monday, finance minister Nirmala Sitharaman informed lawmakers that the central bank sought an amendment to the RBI Act, 1934, so that the legal scope of our definition of “bank note” is widened to include currency in digital form.

As this tweak would enable RBI-run digital tokens to serve our online economy as legal tender, a key differentiator from privately issued coins that have gained so much traction, the sooner it’s done, the better. A test-launch of a digital rupee is said to be imminent, and we must not let this be held hostage by a debate on cryptocurrencies per se, vital though it is to get our policy on other tokens right. The sooner we have our central bank enter the digital fray, the faster will we ascend a learning curve on its impact. We may, for example, be able to check out the hypothesis that RBI tokens can succeed without the shield of a monopoly, something that can hardly be enforced anyway.