Kolkata: India’s central bank governor Shaktikanta Das has backed the role of legal digital currencies in fostering trade beyond national frontiers, underscoring how such monetary units limit the scope for intermediaries and help reduce transaction costs linked to the movement of funds.
“The biggest potential for CBDC (central bank digital currencies) going forward will be cross-border money transfer, which we expect — because it avoids various intermediaries – to be low cost and faster and instantaneous,” Das said Saturday night at a G30 event in Washington DC. “The way forward is to have multilateral arrangements to begin with and then scale it up to global level.”
He was speaking at the panel discussion on the future of money and payments. Bank of England Governor Andrew Bailey and Agusting Carstens, former Governor of Bank of Mexico and now general manager of BIS, also spoke.
Das called for multilateral cooperation in every aspect of promoting CBDC especially on the designing part of it and legal arrangements.
“CBDC can become a model for fast, cheap and safer transfer of money across countries,” he said.
He has also outlined the possible risks – CDBC can create a situation of faster transmission of shocks across countries, can be used for currency substitution and can create capital flow volatility because of faster flow of money across countries; and has stressed on the need for finding technological and systematic solutions for these risks. Das has dismissed the apprehension on whether CBDC and the fast payment system like UPI can work together.
“They are two different systems. CBDC is a currency while UPI is a payment system. They can become interoperable. They can act as back up for each other at the time of crisis,” he said.
On the progress related to the use of UPI, the Governor expressed optimism of crossing the milestone of 1 billion transactions per day next year from 500 million per day at present.
The central bank unveiled the digital rupee, India’s version of CBDC, in 2022 and is trying to make it accessible to all by enabling non-bank payment system operators to offer CBDC wallets while UPI is gaining currency by the day.
