There is lot of brouhaha on digital currency these days globally.Several countries are initiating projects to experiment and finetune systems they believe will simplify the entire payments process, cut down transaction costs and bring in transparency. For example, the Monetary Authority of Singapore is proposing to create a digital currency that will trial on a blockchain driven system for interbank payments,
which the regulator hopes will eliminate the correspondent banks altogether and cut down intermediation costs. MAS has said it will be an internally created digital currency. The other regulators who are doing pilots in this regard
are Bank of Canada, which is again developing a system based on blockchain technology, the People’s Bank of China and Bank of England, which are undertaking experiments on systems that are not based on blockchain, and Riksbank,which is Sweden’s central bank, which intends to develop a system based on a combination of technologies, including blockchain. There are several banks, like the Mizuho Bank, which is testing a digital currency in partnership with IBM, UBS Group,Deutsche Bank and Banco Santander, which have together formed a startup to develop what is described as a ‘utility settlement coin’, intended to be exchangeable between banks, and DBS, HSBC, Bank of America, JP Morgan Chase, Credit Suisse, Bank of Tokyo and Mitsubishi IFJ, which have actually joined the MAS in its initiative.There is also the R3 consortium of global financial firms, which is developing blockchain applications for use in financial services including money transfers, record keeping and other back-end functions. It is interesting to know that the West African country of Senegal is to become one of the earliest to introduce a national digital currency, based on blockchain technology – eCFA. The country intends to make this a legal tender alongside the CFA Franc, the country’s and the region’s national currency. The eCFA is the result of a partnership
between regional bank Banque Regionale de Marches and eCurrency Mint, a fintech startup with a focus on central banks-issued digital currencies. Any digital currency has its advantages. Technically, the underlying technology will
be the distributed ledger, which ensures that a transaction involving a digital currency generates a log and creates related data in realtime. This will allow the governments to monitor currency movements and take corrective measures in cases of tax evasion,funding terrorists or generation of ill-gotten wealth. Given the current scenario we have in India today, where the government is struggling to herald a cashless economy, an initiative of this sort is only appropriate and timely. Instead of talking about increased use of debit and credit cards, mobile banking, payment apps and the like, the Reserve Bank of India should examine the viability of creating a digital currency. This can
help the country leapfrog into a new generation of payment systems. RBI had earlier expressed concern over blockchain technology and bitcoin but the interest central banks of the world are taking in this nextgen technology, should spur RBI to act. There
can then be a BharatCoin!
