The Reserve Bank of India (RBI) has announced reviewing the feasibility of introducing a central bank digital currency.
Alongside the release of its bi-monthly monetary policy statement on Thursday, the RBI announced the constitution of an inter-departmental group to study and provide guidance on the desirability and feasibility to introduce a central bank digital currency.
Furthermore, the Reserve Bank stated that the newly-formed committee would be submitting a report on the aforementioned matter by the end of June this year.
Among its other announcements, the central bank also announced a time frame to implement the recommendations of the inter-agency committees constituted by it to suggest measures for improvement of currency management, including security of movement of treasure.
The committees, inter alia, had recommended the stipulation of minimum standards for cash logistics industry and promotion of a Self-Regulatory Organisation (SRO) for the industry.
To this effect, the RBI, under the ‘Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services’ issued in November 2006, had stated that cash management and logistics at the bank level has largely been outsourced to Cash-in-Transit (CIT) companies and Cash Replenishment Agencies (CRAs). There is, however, no regulation or supervision for this industry at present.
With a view to promote healthy growth of the sector and mitigate risks associated with movement of currency through these agencies, the RBI said it would require banks to ensure that CIT companies/CRAs engaged by them meet minimum prescribed standards, instructions for which would be issued within a month.
Also, in order to ensure compliance with minimum standards for the CIT industry and other applicable laws, the Bank will encourage the cash management industry to promote a Self-Regulatory Organisation (SRO) for undertaking development work along with self-regulation of the industry, till such time that an appropriate legislative structure is put in place.
The central bank also reiterated that although technological innovations, including those underlying virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system, Virtual Currencies (VCs), also referred to as cryptocurrencies and crypto assets, raise concerns of consumer protection, market integrity and money laundering, among others.
Taking cognizance of the risks associated in dealing with bitcoin and other such VCs, the RBI decided that, with immediate effect, entities regulated by it shall not deal with or provide services to any individual or business entities dealing with or settling VCs. Regulated entities which already provide such services, the Bank said, would be required to exit the relationship within three months.