Digitizing The Rupee, Rewriting The Law: A Critical Examination Of CBDC's Legal Implications In India
- IJLLR Journal
- 6 days ago
- 2 min read
Yash Nandini Singh, B.B.A. LL.B. (Hons.), National Forensic Sciences University, Delhi
ABSTRACT
The purpose of this paper is to investigate CBDC as an important innovation in the development of money, payments, and monetary management in India. This study does not consider CBDC as a mere instrument of payment transactions but as a form of money that poses significant legal, economic, and policy questions. This paper commences by introducing the CBDC into the context of India's burgeoning digital payments landscape. Thereafter, the paper contrasts the CBDC to private cryptocurrencies through their characteristics as sovereign money that enjoys legal backing and recognition. By reviewing the existing literature, this study finds that most scholars see the possibility of using CBDC to enhance the efficiency of payment processes, cut down the costs of transactions, promote financial inclusion, and assist in monetary policy transmission. However, the literature has also identified several challenges that CBDC poses.
The article then goes on to examine the legal framework underpinning the issuance of CBDC in India, along with the statutory powers of the Reserve Bank of India and the changes in the legislation for issuing digital rupees. It further explains the role played by the design features of CBDC, whether based on accounts or tokens, in influencing the legal aspects of its development. Another section is dedicated to issues related to privacy and anti-money laundering and counter terrorism financing regulations, illustrating the conflict between transaction tracking and individual privacy. CBDC can also pose a risk to commercial bank deposits due to liquidity problems in case of wide-scale adoption, hence necessitating certain safety measures like deposit limits and staged deployment.
On the whole, the paper argues that CBDC has great scope for enhancing the money system of India, but it will require effective legislation, enhanced privacy, liability laws, and prudence in implementation. This paper’s recommendations and limitations illustrate that CBDC can prove to be a successful concept if introduced effectively.
Keywords: CBDC, India, Legal Framework.
