RBI is set to start its blockchain system: Report

India’s banking regulator Reserve Bank of India’s much-talked forthcoming digital currency will use a private blockchain platform, stated a report in Mint.

The report, quoting sources, stated that the digital currency system would be pretty much like cash to give firm control to the apex bank. The central bank’s private blockchain system will be based on the Unified Payments Interface (UPI) model, where public and private sector firms can create their apps. However, the talks are in the initial phase, and a final decision has yet to make it.

In February this year, Reserve Bank of India (RBI) chief Shaktikanta Das stated that the central bank had reservations over cryptocurrencies such as Bitcoin, Litecoin etc., and was working on its digital currency platform.

However, he added that RBI’s digital currency will be different from other cryptocurrencies. He also added that India’s apex bank would join the technological revolution, where the blockchain platform’s perks will be capitalised on.

Interestingly, in January 2021, India’s central bank had pitched the idea of a Central Bank Digital Currency (CBDC). At present, digital money transactions need a settlement agency, where the CBDC will play peer-to-peer (P2P) transactions. Where the financial entities share messages among themselves, and the final clearing happens at RBI’s level.

Experts said that this new P2P system would cut banks and intermediaries’ role in transactions and allow the banking regulator to observe potential financial crimes closely.

There’s no secret that if RBI creates its system, banks and other financial institutions will have to make their applications on top. Last year in January, NPCI, the umbrella organisation for operating retail payments and settlement systems, launched Vajra, its blockchain-based platform to automate clearing and settlement.

At present, the banking regulator is observing global examples of CBDC and proceeding cautiously. Apart from that, those nations who’re thinking about CBDC will create them on private blockchains. For example, India’s neighbour China is running a pilot for a digital yuan.