In an interview with The Print’s Off The Cuff event on Tuesday, K.V. Subramaniam, executive director at the International Monetary Fund (IMF) and former top economic adviser to the Government of India, discussed the distinction between CBDC and Bitcoin. He said that the banks will keep up with the development of digitalization.
Since the RBI(Reserve Bank of India) began its pilot programs for digital currency, there has been a rise in demand and conversation.
What’s the difference between CBDCs and crypto?
The CBDC (Central Bank Digital Currency) must be distinguished from cryptocurrencies. CBDC is essentially a digital currency issued by the central bank, as opposed to the real cash we carry in our pockets and use when we need to pay someone money. It will in some manner be a component of the money in use, and that is merely the central bank keeping up with digitization, according to the former chief economist for the Indian government.
When questioned if the quantity of currency that would be manufactured and issued in digital form will need to be balanced, Subramanian responded that the printing of currency is based on the demand for cash. According to him, they will print based on how they perceive the level of demand for digital currency (the CBDC). They serve as each other’s replacements in various ways.
What does this imply for digital assets?
The financial industry might change as a result of digital money. Developing nations and emerging markets stand to benefit the most from this abrupt change. For the 1.7 billion individuals who do not have traditional bank accounts, widespread and affordable access to digital money and phone-based transactions might provide access to financial services. Additionally, as nations become more interconnected, trade and market integration may be facilitated.
A country’s ability to keep control over its monetary policy, financial situation, capital account openness, and foreign exchange regimes depends on how digital money is controlled, created, and distributed. Instead of being more dispersed, payment systems must become more interconnected.