The suggestion comes in the backdrop of recent global developments such as Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act), Digital Asset Basic Act bill of South Korea, etc.
About Central Bank Digital Currency (CBDC) and Stablecoin
- CBDC is a new form of money that exists only in digital form.
- Instead of printing money, the central bank issues widely accessible digital coins so that digital transactions and transfers become simple.
- A stablecoin is a programmable cryptocurrency whose value is pegged to another asset, most often the US Dollar or other currencies.
Why does CBDC need to be preferred over Stablecoin?
- Sovereign Backing: CBDC are considered legal tender, i.e. they are recognised and accepted by the government for every transaction.
- CBDCs operate within a regulated framework, ensuring consumer protection, etc. unlike many stablecoins which lack regulatory oversight.
- Cross-Border Payment Efficiency: CBDCs can simplify and speed up international trade payments, reducing reliance on intermediaries like SWIFT.
- Other: Better integration with monetary policy, promotes inclusive and low-cost public payment systems, etc.
CBDC in India
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