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RBI has been very sceptical about the cryptocurrency introduction in India. Discuss briefly about this scenario.

Introduction:

Cryptocurrency is a currency which is not in the physical form. It can be termed as a virtual currency. There are various companies which are dealing with the cryptocurrency and central banks of different countries have already started working in this regard. 60% of central banks are willing to introduce the cryptocurrency of their own. Reserve Bank of India is weighing in the opportunities and threats of these cryptocurrencies.

Body:

RBI is trying to introduce its own Central Bank Digital Currency(CBDC). It is an alternative currency to the national currency which is in virtual form. There are various advantages in this such as:

• Reducing settlement risks
• Reduces cost of printing
• Distribution of currency is easier
• Transportation overheads can be nullified

Also, these currencies are better than the private owned cryptocurrencies like bitcoins because CBDC are less volatile and regulated by the central banks. On the other hand a thorough analysis is being carried out before implementing such system as the risks involved are also high. Some of the risks are:

• Technology preparedness
• Creation of gaps between the different sectors of economy
• Cyber attacks
• Stress on the banks when the depositors don’t have sufficient balances and still withdraw money.

Conclusion:

The legal framework has to be strengthened. India is already facing a lot of financial related frauds due to various reasons. Even though India is known for new technologies in IT sector, the awareness among common people is still a matter of question. A good amount of time is taken by these technologies to get into Indian markets.