'Rather than experimenting with CBDCs, we must come up with a very simple and straight design.'
'Dematerialise your currency/cash and with that dematerialised rupee allow all the transactions digitally.'
Anup Roy listens in.
The Reserve Bank of India must expedite the floating of the central bank digital currency (CBDC) or should collaborate with other nations for an international digital currency, and not let the digital dollar be the effective digital currency of the world, said former finance secretary Subhash Chandra Garg, the keynote speaker on day two of Business Standard's BFSI Insight Summit.
He was part of a discussion whether it's time to say yes to cryptocurrencies.
The former finance secretary was of the opinion that digital currencies are indeed the future, and the technology is robust, but he expressed doubts over whether the private cryptocurrencies would stay relevant in the future.
"Sooner or later, governments and sovereigns will also come up with a digital currency. Once the official digital currency comes in, most private currencies, including stable coins, will disappear," Garg said.
Stable coins are cryptocurrencies that are pegged to a fiat currency, such as the dollar.
Therefore, unlike Bitcoin, the scope of speculation in stable coins is relatively less.
But they are still privately held, something that poses a systemic challenge.
Many nations, including India, are trying to build their own CBDCs, and according to Garg, they can be modelled differently than what is being proposed.
"Rather than experimenting with CBDCs, wholesale, retail etc, we must come up with a very simple and straight design. Dematerialise your currency/cash and with that dematerialised rupee allow all the transactions digitally," Garg said.
For wholesale, the government and the RBI may want another set of cryptocurrency, but having two currencies, ultimately, may not be a good idea, he said.
The physical currency, or notes, will continue to survive as it is difficult to implement changes in one go in a country like India, the former finance secretary said.
The crypto platforms are indeed the future, said Garg, who once headed an inter-ministerial committee on cryptocurrencies.
"This technology is the most versatile, it is more competitive, more efficient. Those platforms will survive, and we should say yes to that technology. We should embrace this and take it forward," said Garg.
However, the real problem with cryptocurrencies lies in how they are valued.
The platforms, at the same time, embed every input to the currency that they host, which could make cross currency transactions difficult.
Cryptocurrencies, such as Bitcoin, are also no longer just a currency, but have become assets in the hands of speculators.
Garg favoured bringing in a cryptocurrencies transactions law, fashioned on securities contract transactions, "not for every cryptocurrencies, but for the assets platform services."
Feature Presentation: Aslam Hunani/Rediff.com