Raghuram Rajan, the former governor of the Reserve Bank of India believer neither private nor central digital currencies should come under monopoly. He believes the private digital currencies including Bitcoin and Facebook’s Libra have potential. He says that these digital currencies will remain popular even when central banks roll out their digital currencies.
However, the only concern of Rajan is the monopoly. Rajan, who was also working as a Chief Economist and Research Director at the International Monetary Fund during 2003-2006, said that the digital currencies may have a problem if they hold a monopoly. The platform of Bitcoin and other cryptocurrencies is entirely different from fiat currency.
The private digital currencies will give a tough competition to the digital currencies launched by the government. Although he believes Bitcoin is not just a mere medium of exchange instead, it is a valuable asset just like gold. Facebook’s digital currency Libra will be used as an everyday medium of transactions.
Rajan says if the central banks issue the digital currencies, each transaction may require many types of information. This information can be collected through CBDCs but Rajan has a concern about whether or not people will be willing to share so much information.
There are many sorts of personal payment information involved in banking too. The banks, however, may need to decide which information they want to collect and how they will use this information. Rajan added just the way private digital currencies cannot work efficiently under monopoly, the central bank digital currencies may have no safeguards.
Customer data can be used by central banks and their management without any privacy control. Both types of digital currencies will play a significant role in the market despite being issued by different mediums.
The thought of having digital currency is still an idea among the central banks of India. But it will soon be materialized and there will be a digital version of the fiat currency. While Bitcoin is a decentralized currency unlike the fiat currencies, the idea of having a centralized digital currency can bring many changes in the world of digital currencies.
Rajan concluded that to make the idea of centralized digital currency and still competing with the decentralized one, will be a challenge in itself. There should be some protocols to handle the data of every transaction, he added. To propel the global usage of digital currencies, proper implementation of the digital currency is what banks need to focus on.