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Global consensus for use of e-currency: RBI

There is a global consensus that the central bank digital currency (CBDC) will be useful for more efficient cross-border payments and distribution of funds during a crisis like the pandemic, the Reserve Bank of India (RBI) has said.
Quoting the Bank for International Settlements, the RBI said that 90% of central banks were actively researching the potential, 62% were experimenting with the technology and 26% were deploying pilot projects. The RBI is among the pioneers, having launched a CBDC — the eRupee — for both wholesale and retail use.
“The Covid pandemic created conditions to support exponential growth in digital payments and the proliferation of private cryptocurrencies as an alternative to financial assets fetching low returns. This experience prompted central banks to accelerate work on CBDCs,” the RBI said in its report on trend and progress of banking in India.

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The Financial Stability Board, an international body created in the wake of the global financial crisis, has identified several vulnerabilities relating to cryptocurrencies. These include linkages between crypto market & regulated financial system, liquidity mismatch, credit & operational risks relating to stablecoins, risk concentration, low investor understanding, opacity, money laundering, cybercrime and ransomware. “CBDCs, if implemented correctly, can promote diversity in payment options, make cross-border payments faster and cheaper, increase financial inclusion and possibly facilitate crisis-time — such as a pandemic — fiscal transfers to targeted beneficiaries,” the RBI said.

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