Is RBI creating a new digital black money economy with their CBDC?

RBI has created a pilot digital currency. It was recently clarified by RBI Governor that once withdrawn by an individual from an authorised bank (subject to the same limits as applicable for paper cash), the digital cash becomes anonymous as no intermediaries are involved. Private developer-created apps will mediate the transfer between mobile-based digital wallets.

All this while, the government has been stressing the need for a cashless economy to avoid unaccounted transactions and created the highly successful UPI system to facilitate cashless transactions (which is in fact a far more advanced system than any such systems of the so-called advanced countries). Recently however, there have been reports of bribes being received using UPI by corrupt public servants in the names of their family members, but such payments can never be very large. Since these UPI-based transfers are still operated over bank accounts, it is quite possible to identify the bribe receivers (if the government is really serious), particularly for larger amounts. But with the CBDC in place, people can receive bribes with complete anonymity and impunity. I visualise a scenario with all the sub-registrars and RTOs and other miscellaneous babus rushing to create digital wallets in anticipation of future bonanza.

It is also not clear how rigorous is the protection of these digital wallets against hacking. Now in addition to patient data, our digital money may also be at risk of being stolen by Chinese hackers. Not to be left behind, our own home-grown crooks will also be busy devising new ways of relieving you of your digital cash a-la- Jamtara of OTT fame.

I am for one, quite happy with my GPay and PayTM apps which I use in place of small change; and do not foresee a situation where I will create a digital wallet for anonymity, which in my opinion is not required by any honest taxpayer like me. For larger expenses, there are cards still there, where we at least know how to safeguard ourselves from nefarious tricksters, mostly. more  

View all 6 comments Below 6 comments
Please note that Digital Currency is for use of Businesses and not common man. The transactions can be traced so question of black money generation does not arise. In fact CBDC is expected to reduce cash transactions and help in eradicating black money. more  
No. This is also meant for payment by individuals to others, just like cash. more  
I think Anonymity does not mean No-traceability. more  
If it is traceable, it is not anonymous. more  
Anonymity of digital currency is a fact guaranteed by RBI. This is based on the news item more  
Manuel Aaron: Though I am a well educated person and retired from a bank some 27 years ago, I understand ordinary banking and using a credit card. But Digital banking, Digital currency, digital wallet and Digital India are beyond my limited knowledge. And there maybe hundreds of others like me or even worse as far as 'digital' is concerned. When we changed from Rupees, more  
Well written, Sri. Manuel Aaron. I was a person from Adyar living in the USA. I still have financial relationship in India. I have no understanding of this digital currency stuff, nor do I need to know. Sometimes ignorance is bliss. My wish is India were to have some sensible financial practices with existing systems. I am referring to the banks and Income Tax processes/practices. It is frustrating. Oh well, I grin and bear it and plough along. more  
The Govt approved Regulated digital currency is an answer to 'Crypto Currency' which is widely used to create Benami Assets. Crypto currency is open to wild speculation, because it is unregulated. As rightly pointed out by Mr Jagnani, ' RBI regulated, digital currency will further help in advancing Cash Less Transactions. Also this is being introduced on Trial Basis and will be monitored to find out if it leads to generating Black Economy. more  
Digital currency is the same as cash, just in a different form. So strictly speaking, transactions using digital currency are still cash transactions only. more  
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