RBI explores India's digicoin, banks told to reject bitcoins

Mumbai: Joining a host of countries whose central banks are weighing pros and cons of issuing their sovereign backed digital currency, the Reserve Bank of India on Thursday said that it has set up a panel to explore the introduction of its own ‘fiat’ digital currency.

“An interdepartmental group has been constituted to study and provide guidance on the “desirability and feasibility” to introduce a “central bank digital currency” and will submit its report by June,” RBI said.

RBI deputy governor B.P. Kanungo said, “As opposed to private digital tokens, these are issued by a central bank. They constitute liability of the central bank, and they will be in circulation in addition to the paper currency that we have.”The deputy governor said digital currency can also reduce the cost of printing and circulating paper currency.

Mr Kanungo was speaking at a post-policy press meet by RBI governor and deputy governors in Mumbai on Thursday.

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Recently, there was a speculation of the government planning to lau-nch its own digital currency called Laxmi coin.

While the blockchain technology is considered to enhance the efficiency and speed of financial transactions, Basel-based Bank for International Settlements (BIS) said “central banks must carefully weigh the implications” of introducing digital currencies. BIS said it could impact commericial banks as deposits could take flight easily in the times of crisis.

In an attempt to ringf-ence Indian entities from volatility of cyptocurrency, he said RBI has asked banks to “stop having a business relationship with the entities dealing with virtual currencies forthwith and unwind the existing relationships within three months.”