The Reserve Bank of India (RBI)’s Governor, Shaktikanta Das, has presented Central Bank Digital Currencies (CBDCs) as a solution to ‘excessive cost, low speed’ cross-border payments. In a keynote speech at the G20 TechSprint Finale 2023 in Mumbai, he highlighted the potential of CBDCs to revolutionize the global payment landscape, tackling issues such as high costs, slow transaction speeds, limited access, and inadequate transparency.
India is currently in the trial phase of its national digital currency Digital Rupee. The benefits of streamlined cross-border payments are far-reaching, affecting people and economies all over the world, Das noted.
Governor Das also mentioned that many central banks around the world are considering the implementation of CBDCs, recognizing their ability to shape the future of finance. India has taken a proactive stance by launching CBDC pilots in both the wholesale and retail segments. This phased approach allows for data collection and analysis, which will play a decisive role in forming future policies and systems.
The central bank’s governor pointed out that digital currencies, in this case CBDCs, eliminate intermediaries and automate the settlement process. The G20 TechSprint 2023, as Governor Das stated, focuses on critical problem statements aiming to improve the global financial system. One of these problems refers to combating illicit finance risks. The challenge is to develop innovative AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism) technology solutions that not only improve the screening process but also reduce the risks associated with illicit finance, a menace that siphons off a large portion of the global GDP.
Another issue that the RBI governor cited is related to foreign exchange and technology solutions for currency settlement. The purpose of this is to encourage the use of local currencies in cross-border payments, particularly in Emerging Market and Developing Economy (EMDE) currencies. This approach can provide protection against exchange rate fluctuations and promote the growth of local foreign exchange and capital markets.
RBI governor further said that they are inviting solutions and technologies for multilateral cross-border CBDC platforms which would contribute to interoperability across multi-CBDC platforms or domestic payment systems that can reduce operational cost and improve efficiency, while ensuring consistency in standards across multiple jurisdictions.