Blockchain not best for digital currency, experts suggest other technologies

While presenting the Union Budget Finance Minister Nirmala Sitharaman announced the launch of the digital Rupee by RBI during 2022-23 “using blockchain and other technologies”.

Industry experts suggest the government of India to host its proposed digital currency in other “centralised” technology models instead of blockchain due to its massive power consumption.

Senior officials aware of developments suggest RBI to either offer the proposed ‘digital Rupee’ directly to the citizens or use the ‘retail indirect’ method to offer it to citizens by issuing digital currency to banks, according to The Economic Times report.

Also Read | Experts see digital rupee as a big boon to India

“Blockchain has huge power consumption even if there is a most efficient system. The settlement time is higher and there are permission issues,” said an official aware of the discussions, who said no other country is building its digital currency using blockchain. “There can be an arrangement where RBI and banks use blockchain, but banks can then use other technologies to transact with the customers,” the official told the publication.

Central bank digital currencies (CBDC) are digital version of fiat currency. They are not the same as private cryptocurrencies that are yet to be approved by the government.

With India’s recent development in digital banking and e-payment, experts find it the right time to launch CBDC as countries like China, Russia, Bahaman, and United States are moving in the way to use CBDC.

However, the feasibility of CBDC being launched in 2022-23 still exists.

“According to various discussions within Niti Aayog, many levers have been operationalised with the 2022-23 timeline in mind,” said Samrat Kishor, regional representative at Enterprise Ethereum Alliance told the publication.

“It is likely that the initial use cases will be centred around business-to-business and business-to-government payments, as it will be difficult to push citizens to digital wallet usage within the timeframe,” he added.

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