‘Digital Currency and Banking Sector: Emerging Issues and Challenges’

Authors

Fr. N. BUJJI BABU
Research Scholar, Department of Commerce and Business Administration, Acharya Nagarjuna University, Guntur, Andhra Pradesh, India.

P.KOTESWARA RAO, Professor
Department of Commerce and Business Administration, Acharya Nagarjuna University, Guntur, Andhra Pradesh, India.

Abstract

The paper outlines the role, issues and challenges of establishment of a Central Bank Digital Currency (CBDC) in the context of the recent interest in crypto-currencies and the role of Blockchain. The importance of CBDC is highlighted in the background of the importance of technology and the role of the banking sector. It highlights the advantages of Digital currency which include a reduction in the cost transactions, cost of printing currency, possibility of better supervision over money laundering and the fact that it may be more transparent. It is proffered that an important justification for the CBDC may be that the Central banks are increasingly weary of the payments systems being cornered by the large technology companies, as in the case of countries like China. The flip side of a CBDC is that there is a need for a more exhaustive analysis on the possible impact on the banking sector since there is a risk that a CBDC is essentially a form of electronic wallet that is held with the central bank which means that billions of the national currency may flow into the coffers of the Central Bank and away from the present day financial players. The paper also analyses the challenges that may accompany the introduction of a CBDC and concludes that the road ahead is not a bed of roses but one that should be approached cautiously.