Future of digital currency in India
China paving way for implementing a digital currency before the winter Olympics 2022 which will be held in China. They started the run as early as 2014 when the crypto currency have started it's pace and they are trying to break the USD hegemony by making a currency to be used in international trade.
India too is optimistic in introducing a digital currency of its own. The Central bank governor has expressed in a recent interview its decision to start a trial on digital currency by the middle of 2022. RBI is analysing all the financial and economic impact it could have in the currency system and also the concern regarding security. Unlike crypto currency CBDC - Central Bank Digital Currency - as it is called has RBI backing and it is only a digital form of the fiat currency. meaning, people can use the digital currency instead of the existing paper currency with no change in value. It could be a positive approach that reduces the use of physical currency and the burden of carrying currency every time we do a transaction. Moreover, this would lead to India's dream of a digital economy as a prelude for modern India.
Conversely, this is going to be an era of attack on citizen's privacy too. The digital currency and the log of transactions that it creates, will be stored in a server which the government can always watch and literally use it as a tool to control, target and prosecute those who criticize the authority or track laundering. These servers will be a digital book that records every move that we make using the digital wallet and could issue reports to the government based on any criteria. These reports enables them to even predict how people are going to use the money based on past transaction history and control their action in unique ways including prosecution and coercion if they so desires. Moreover, government can freeze or block the consumers from accessing the digital currency by simply changing the parameters which could be used as a suppression tool to control the voices that are against their policies. This would be disastrous and people should be aware of these authoritarian capability which China has used against its citizens when the Chinese communist party went through criticism.
Hence, unless RBI introduces ways to overcome such concerns people has and provide assurance that it would be safe not only in security terms but on privacy as well, citizens will be reluctant to accept this new technology that could undermines their freedom that they enjoyed so far. The fear that their social media comments and posts could be watched by some algorithms and would be used against them by controlling their access to the hard earned money lying in a digital wallet, going to be the biggest hurdle RBI has to tackle for the smooth implementation of digital currency.
Apart from these concerns the question of how are they going to provide these services where more than half of the country does not enjoy a smartphone which is the core of digital currency's success. Then again the literacy of rural India which is paramount for using and understanding smartphone and digital currency, is still a promise that politicians make during the election.
So, even after the trial of this technology which is expected to be a success, the other core issues the government and RBI are required to solve are the mobile services in India, the people's ability to understand this new system and ultimately the security of the digital currency. Indeed, digital currency is a huge step ahead and India is leaning for her dream of a digital India and the endeavor for modern economy.