The Future of Central Bank Digital Currencies (CBDCs) in India Industy experts shared their thoughts on the future of new wave of payments, at the Tech & Innovation Summit, organised by Entrepreneur India.
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Central Bank Digital Currencies (CBDCs) are the digital versions of a country's sovereign currency, which is issued and regulated by its central bank. Unlike crypto currencies that rely on decentralized networks, CBDCs are centralized and backed by the nation's government, ensuring legal recognition.
CBDCs can be tailored for retail use for wholesale transactions. However, their implementation raises concerns about privacy and potential disruptions to traditional banking systems.
Top experts working in the CBDC space convened on stage Tech & Innovation Summit, for a discussion on the future of the payment method with Ayushman Baruah, Regional Bureau Head at Entrepreneur India.
Aishwary Vishwanath, Global Head of Payment and Fintech at Polygon Labs, explained the major factor involved with cryptocurrency against money issued from the bank and said that
"From a cryptocurrency perspective, a lot of stable coins try to imitate currencies. Mostly, all that money is just replicating your dollars. The money that is there is also a loan. The stable coins that you have are a loan. They are not actually backed by the government. It's basically the money inside a company against which there is a loan that has been drawn out and that loan is given out to you in the form of stable coins. So the level of backing from the government side, it's tremendously low."
Vishwanath added that if issuers like Circle and Tether fail, there may be a fair chance of people not getting their money back.
CBDCs were launched in India back in 2022 and since then, adoption rates in India have been underwhelming.
Sathvik Vishwanath, co-founder and CEO, Unocoin thinks that when it comes to any new technology, India has always been slow in adoption, as was the case with the internet, NEFT, RTGS in the country.
"But when it comes to CBDC, I think there is more friction as compared to other things. There are many countries which actually are not at all in favor of CBDC already, and generally India has taken a conservative view, like how it works in other countries."
Sathivik also stressed the effects of CBDSs becoming popular, one of which a threat to the operations of traditional banks.
"So there is abit of competitive friction that already exists between the Reserve Bank of India and the banks"
Shounak Shetty, Token Launch Manager, Outlier Ventures added that even though CBDCs were initially supposed to service people who dont have access to traditional banking services, government policies have made it tough because one cannot access CBDC without having a mobile phobe and an actual banking account.
"CBDCs are competing with the banking system. But the government has taken the view that the onboarding needs to happen through banks. Now why would the banks want to enable something that is competing with them?" said Shetty.
Shetty also touched on the topic of the nascency of CBDCs in India by saying that the infrastructure for it in India is not of very high quality, with people reportedly working in the industry not aware of its features, and said that 'Digital Yuan' by China is the most advanced in the world.
On the future of CBDCs, Vishwanath said that if any new technology fails to provide a better system than the one that already exists, there is no point in hoping for adoption.
Shetty added to the point and said that this very discussion took place in the World Economic Forum event earlier in Davos, and the industry leaders were also quite unclear about its usage.
"There is no current USP to CBDCs overall in the world. There is no unique value proposition or selling point where I can get you to use it. But as it evolves and it has more functionality, it will become one of the modes of payments that we'll have. Similarly, you'll have all these kind of payment mechanisms, Visa, MasterCard, Amex, everything. There's no real way of distinguishing why you should use it. It's on an individual basis why they should use it. But at its current form, nobody in the world knows why you should use it," added Shetty.
