digital naira and rupee pilots coming soon

Digital Naira pilot rollout in 2021. Rupee also being considered by central banks in Nigeria and India

The Reserve Bank of India is considering a phased plan to implement a digital Rupee, and the Central Bank of Nigeria aims to launch a digital Naira pilot later this year.

India’s and Nigeria’s central banks have drawn up plans towards launching their own sovereign backed digital currencies this year.While the Central Bank of Nigeria (CBN) aims to launch a digital Naira pilot in October, the Reserve Bank of India is considering a phased plan to implement a digital rupee.

Central Bank Digital Currencies (CBDCs) is a central bank digital currency issued by a central bank in digital form. It is same as a fiat currency but the form is different and is exchangeable one-to-one with the government-issued money. In other words, CBDC is the same as the legal currency we use. However, CBDCs differ from digital money like cryptocurrencies, which are private and decentralized tokens.

Digital Naira to launch in October 2021

The director of information technology from the Central Bank of Nigeria, Rakiya Mohammed stated that the CBDC pilot will begin from 1st October in Nigeria. He added, the bank had been researching a possible CBDC for years and would be drawing a digital naira before the end of this year. Financial officials in Nigeria were struggling with how to deal with the rise of cryptocurrencies in the country and had prohibited all major crypto transactions in the banking sector in February this year.

Later Rakiya Mohammed stated “Cryptocurrencies such as Bitcoin and the rest of them are not under the control of the central bank; they are purely private decisions that individuals make and are not part of this arrangement,”

The CBN’s deputy governor Adamu Lamtek clarified that crypto trading was not banned, and its popularity has continued to grow despite the banking restrictions.

Digital Rupee coming soon after?

On the other hand, Deputy Governor T. Rabi Sankar said the Reserve Bank of India (RBI) is considering running a series of pilot programs for a proposed CBDC. Reserve Bank of India(RBI) is weighing a “phased introduction” of a digital rupee to allow time required for legal changes in country’s foreign-exchange rules. He also added that it would reduce currency costs for the government and protect citizens from the volatility of cryptocurrencies. The creation of a Digital Rupee will provide an opportunity for India to empower its citizens and enable them to use it freely in our ever-expanding digital economy and break free from an outdated banking system.

RBI has been working on the idea of CBDC for years. Virtual currencies like bitcoin have gained popularity in India in recent years and unofficial estimates suggest the country has around 15 million investors holding over ₹ 100 billion ($1.34 billion) in crypto assets.

Looking into its impact on macroeconomy and liquidity, banking systems and money markets, it is imperative of policymakers to thoroughly consider the prospects of Digital Rupee in India. The RBI published a report back in March that highlighted the benefits of a CBDC for financial inclusion and drawbacks related to raising the cost of lending through commercial banks.

While the Indian government has previously indicated its intent to ban cryptocurrencies, the mood has shifted in recent months with signs of the country taking a more lenient approach by regulating the crypto market. So far, at least 40 % of Central Banks around the world are testing pilot programs.

Cryptocurrency experts claim that the government has misunderstood the digital currency in the past. Many nations across the globe have expressed fear over cryptocurrency irregularities and their democratic motive. Fortunately, they can change the fate of cryptocurrency if they see it as digital cash. By acknowledging cryptocurrency as digital cash, governments can monitor their valuation and track the transfers, and some may also be driven by market forces, which include payment providers such as Mastercard, who have already stated they are exploring crypto payments.

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