1 / 11The Reserve Bank of India (RBI) will introduce its own version of Central Bank Digital Currency (CBDC) in a phased manner and after carefully weighing its impact on various issues, including how it could hamper the deposit mobilisation abilities of banks, and its potential effect on the conduct of the monetary policy, deputy governor T Rabi Sankar said in a speech on Thursday.2 / 11“However, conducting pilots in wholesale and retail segments may be a possibility in near future,” the RBI deputy governor said.3 / 11The RBI is currently working towards a phased implementation strategy and examining use cases 'which could be implemented with little or no disruption,” Rabi Sankar said in an online discussion on the issue, organised by Vidhi Centre for Legal Policy.4 / 11The RBI has been exploring the pros and cons of the introduction of CBDCs “since quite some time,” he said. The Indian central bank will also draw upon the lessons from other countries that are in various stages of introducing such a digital fiat currency.5 / 11In particular, the Indian central bank would evaluate the scope of CBDCs -- whether they should be used in retail payments or also in wholesale payments. The underlying technology, whether it should be a distributed ledger or a centralised ledger, is also being evaluated. 6 / 11 Whether the underlying technology should vary based on use cases is being debated at the central bank. Besides, other modalities such as token-based or account-based validation mechanism, distribution architecture (direct issuance by the RBI or through banks), and what would be the degree of anonymity granted for such CBDCs are also being determined at the RBI.7 / 11While the issue of CBDC has been touched upon by the RBI Governor himself, this is the first detailed discussion on the issue from a central bank official.8 / 11The issue of CBDC has crept up in the last few years with the advent of private virtual currencies, such as bitcoins. While these private currencies have their own benefits, they are not backed by any government and therefore do not follow any proper jurisdiction. 9 / 11The wide adoption of these currencies threatens to upend the established model of fiat currencies issued by countries within a border.10 / 11Besides, if the virtual currencies gain recognition, “national currencies with limited convertibility are likely to come under threat,” Rabi Sankar said, adding such private currencies can therefore have potentially damaging social and economic consequences.11 / 11The introduction of CBDC would unlikely hamper the usage of cash, but if anonymity is ensured, then transactions can switch over from cash to digital means.