RBI has recently launched a pilot for its digital rupee and the financial expert Sethurathnam Ravi approaches it as a first step towards CBDC. As per the former BSE Chairman, this is a once in a generation opportunity for India to be a world leader, and the question is whether the RBI will spur innovation or, as with fintech, wait for an inescapable inevitability while the sector lags.
Blockchain will change the way the world works, highlights Mr. Ravi in his latest article. In the author’s own words, “It has applications across the spectrum – decentralization, provenance, transparency, and security are all features key to processes across a wide array of business domains. The domain it will most emphatically impact though, is financial. It will precipitate reimagination of money in a way as, or probably more, profound as how dematerialization did when Western Union invented wire transfers, or when credit cards changed how we pay”.
In the past years, the proliferation of cryptocurrency has demonstrated the ease and swiftness with which this will happen. However, the speculative nature and closed access to mining (techies and highly resourceful entities) has created substantive – and apt – pushback. “From a money perspective only, stablecoins present the most viable pathway, the expert points out.
Yet a mix of a complete deregulation approach and an absolutist outlook of the technological innovators in the domain have caused events such as the recent collapse of an ‘algorithmic’ stablecoin causing potential doubts in the minds of the public at large. The core issue here being a lack of underlying security or a guarantee in the case of the money we use today. Sethurathnam Ravi BSE former chairman also mentions that arguments can range from questioning the logic behind valuing gold to questioning the stability and/or intentions of the government that issue fiats, but the real issue is the lack of structured regulation. So to imagine that a completely free and fair system would operate decentralized currencies is a false notion, Sethurathnam Ravi underlines.He also explains the importance of CBDC in this scenario.
Central Bank Digital Currency or CBDC ideally, bring all the benefits of blockchain and decentralisation, while eliminating the risk of the absence of underlying security. “A well administered CBDC not only digitises money with complete security and traceability, but also helps eliminate black money almost entirely from the system. It can also help governments reach unbanked segments effectively with a robust self-sustaining system ‐ giving access to not just savings products, but also to credit by bringing all their transactions online”, S Ravi BSE former chairman explains.
RBI recently introduced what it calls the e-rupee for wholesale transactions on a pilot basis. While this is a welcome move towards the leveraging of blockchain and creating more robust money and a much-improved financial infrastructure, it is a far too slow and limited movement, Sethurathnam Ravi says. He also adds that, “India has in the past seen itself being left behind on the fintech revolution for precisely the same reasons we are seeing now. We need to be ahead of the curve in the finance space the same way the Honorable PM has promised in the telecom space by committing that India will lead the world in 6G rollout”.
In the coming years currencies will move to blockchain and will be decentralised. Cryptocurrency, stablecoins and NFT (in the form of tokenised tradeable assets) will be freely traded globally, the expert analyses. The RBI pilot of the wholesale version of e-rupee is an absolute positive step and must be praised. “Blockchain will be the next revolution and India has the wherewithal to be the undisputed leader in the world. Claiming this will not only bring prestige but will also drive growth and generate massive wealth and value. We owe it to ourselves and our country to use this opportunity to recoup the past losses from foregone opportunities”, Sethurathnam Ravi concludes.
