Indian Institute of Information
Technology, Lucknow
भारतीय सूचना प्रौद्योगिकी संस्थान, लखनऊ
(An Institute of National Importance by the Act of Parliament)
Digital
Disruption
MBA (Digital Business)
Semester 3
Term: 2023-2025
11/14/2024 IIIT Lucknow | Digital Disruption | Dr. DN Pandey 1
Digital Disruption
(DD340C)
Mentor-cum-
Instructor : Dr.
DN Pandey
Topic:- Analysis of Prospects
and Challenges of CBDC in India
Course : MBA (Digital
Business) 2023-2025
Semester: 3
11/14/2024 IIIT Lucknow | Digital Disruption | Dr. DN Pandey 2
Our Team
Dharmendra Singh Muzahid Hussain Anjali Kumari
MDB23008 MDB23023 MDB23028
Ishrat Kashafi Utkarsh
11/14/2024 IIIT Lucknow | Digital Disruption | Dr. DN Pandey 3
MDB23029 Pandey
Analysis of
Prospects
and
Challenges of
CBDC in India
11/14/2024 IIIT Lucknow | Digital Disruption | Dr. DN Pandey 4
Table of
Content
• Introduction
• CBDC
• Features of CBDC
• Rationale Behind CBDC Adoption by Central
Banks
• Drivers Behind CBDC Success
• India's Journey to CBDC
• Impact of Monetary Policy on CBDC
Adoption
• Regulatory and Legal Framework
• How can India benefit from the adoption of
CBDC?
• Challenges in Implementing CBDC
• Future Prospectus
• Conclusion
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Central Bank Digital Currencies
• A Central Bank Digital Currency is a digital form of
CBDC currency issued and regulated by a country’s central
bank
• In recent years, the concept of Central Bank Digital
Currencies has emerged as a transformative force in
the realm of financial systems and monetary policy
Retail Wholesale • Central Bank Digital Currencies represent a
significant evolution in the world of money, blending
the stability of traditional fiat currencies with the
advantages of digital technology
I I I T L U C K N O W | D I G I TA L D I S R U P T I O N | D R . D N
PA N D E Y
Global Developments
50
45
44
40
39
35
• 98% of global GDP, are exploring a CBDC 30
• Every G20 country is exploring a CBDC, with 19
of them in the advanced stages of CBDC 25
exploration
• Three countries have fully launched the Bahamas, 20 21
20
Jamaica and Nigeria
15
• Since Russia’s invasion of Ukraine and the G7
sanctions response, cross-border wholesale CBDC
projects have more than doubled 10
5
5
3
0 2
Launched Pillot Devlopment Research Inactive cancelled other
I I I T L U C K N O W | D I G I TA L D I S R U P T I O N | D R . D N
PA N D E Y https://www.atlanticcouncil.org/cbdctracker/
Core
Othe
r
IIIT Lucknow | Digital Disruption | Dr. DN Pandey
Issued by Digital Legal Linked to Potential
Central Form Tender Fiat for
Banks Currency Interest
Enhanced Improved Financial Cross- Policy
Security Efficiency Inclusion Border Implemen
Payments tation
IIIT Lucknow | Digital Disruption | Dr. DN Pandey
Rationale Behind
CBDC Adoption
by Central Banks
• Financial Inclusion: Access for unbanked
populations, lower banking costs.
• Better Payments: Faster, cheaper, and
resilient transactions.
• Monetary Control: Competes with
cryptocurrencies, improves policy tools.
• Less Cash Dependency: Replaces cash,
reduces management costs.
• Financial Stability: Lowers shadow banking
risks, safe in crises.
• Tech Innovation: Boosts blockchain and
financial innovation.
• Global Competitiveness: Maintains currency
sovereignty.
• Transparency: Fights illicit activities with
better oversight.
• Data Insights: Enhances policy-making with
real-time data.
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Drivers of
CBDC
Success
• Tech Advances:
• Blockchain: Secure, transparent
transaction tracking.
• DLT: Fraud-resistant, immutable records.
• Cryptography: Protects against cyber
threats.
• Economic Factors:
• Inclusion: Access for unbanked
populations.
• Monetary Policy: Direct fund distribution.
• Cross-Border Payments: Lowers costs,
removes intermediaries.
• Efficiency: Reduces fraud and enhances
payment systems.
• Competition: Addresses private
cryptocurrency popularity.
• Resilience: Offers alternatives in crises.
• Policy Considerations:
• Privacy: Safeguards personal data.
• Stability: Requires regulation to manage
risks.
• Interoperability: Must work with existing
systems.
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India's
Journey to
CBDC
• RBI's Announcement: The
Reserve Bank of India is
planning phased trials for a
Central Bank Digital Currency
(CBDC) to modernize payment
systems.
• Implementation Phases:
Trials will start in specific
sectors or regions to resolve
technical issues before full-
scale launch.
• Regulatory Framework:
Strong data protection and
financial regulations are
essential for ensuring security
and operational efficiency
during the rollout.
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Impact of Monetary
Policy’s
• Monetary Policy Control
• Liquidity Management
• Interest Rate Flexibility
• Zero Lower Bound
• Financial Disintermediation
• Crisis Management
• Real-Time Monitoring
• International Effects
• Inflation Control
• Financial Stability
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Regulatory and Legal Framework for CBDC
Adoption
Clarify CBDC as legal • Monetary Sovereignty
Legal Tender tender. • Ensure central bank control.
Status Amend laws to include
CBDCs. • Restrict private digital currencies.
Protect against fraud, • Cross-Border Considerations
Consumer data breaches. • International coordination for payments.
Protection Ensure financial
inclusion.
• Harmonize regulations globally.
Strong data privacy
laws. • Financial Stability
Data Privacy Balance privacy and • Address risks to banks.
security.
and Security Set cybersecurity
• Clarify deposit insurance for CBDCs.
standards.
Follow AML/CTF • Technological Standards
AML and CTF regulations.
Implement KYC and
• Set technology standards.
• Encourage innovation under supervision.
Compliance transaction
monitoring.
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Challenges in
Implementing CBDC
Cybersecurity • Risk of cyberattacks, fraud, and data breaches.
• Need for strong encryption and safeguards.
Threats
• Gaining public trust through education and user-friendly
Public systems.
Acceptance • Addressing privacy concerns.
Technological • Bridging the digital divide in areas with poor connectivity.
Infrastructure
• Risk of surveillance due to transaction monitoring.
Privacy Concerns • Potential misuse of financial data.
• Explore tiered privacy models (anonymous for small
Balancing Privacy transactions).
and Security • Strong encryption and transparent data use policies.
Currency • Managing exchange rate volatility in cross-border transactions.
Exchange and • Multi-CBDC platforms for easier currency settlement.
Conversion
• Harmonizing legal frameworks across countries.
Regulatory • Compliance with international AML/CTF rules and KYC
Coordination standards.
• Ensuring technical compatibility between CBDC systems.
Interoperability • Blockchain and DLT systems must be interoperable across
borders.
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Future Prospects
of CBDC in India
1. Global Context of CBDCs
• 114 countries exploring CBDCs, including India.
• RBI aims for the e-Rupee to be seamless, ubiquitous, and consumer-
friendly.
2. Enhanced Financial Inclusion
• Expanding access to financial services for unbanked and underbanked
populations.
• Promoting economic equality by providing a digital alternative to cash.
3. Increased Transparency
• Traceable and compliant transactions via secure blockchain or
distributed ledger.
• Boosts consumer confidence and simplifies cross-border payments.
4. Efficient Government Payments
• Streamlining disbursement of subsidies and welfare programs.
• Ensures funds are used for intended purposes with better tracking.
5. Real-Time Transactions
• Faster, more efficient payments with lower transaction costs.
• Improved cash flow for businesses.
6. Reduced Physical Currency Costs
• Eliminates costs related to cash printing, transportation, and
maintenance.
• Savings redirected to critical economic areas.
7. Closer Banking Relationships
• Retail e-Rupee will strengthen consumer connections with RBI.
• Enables better credit assessments and access to loans and banking
services.
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Conclusion
• CBDCs represent a transformative step in
modernizing currency, offering benefits
like enhanced financial inclusion, lower
transaction costs, and increased
transparency. They also give central
banks more direct control over monetary
policy. However, challenges such as
privacy concerns and cybersecurity risks
must be addressed. As countries,
including India, move toward digital
currencies, a balanced approach focused
on security, innovation, and public trust
will be crucial. The e-Rupee holds the
potential to shape India's financial future
and lead to a fully digitized economy.
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Thank You
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