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India’s growing adoption of blockchains and distributed ledger technology has bolstered support for tokenized deposits or digital representations of traditional bank deposits hosted on a secure blockchain, according to the Reserve Bank of India (RBI). “Tokenised deposits may have various use cases across domestic and cross-border payments, trading and settlement, and for cash collaterals. In fact, by being programmable, they can be used seamlessly in smart contracts, merging payment information and payment value to provide ‘atomic’ settlement,” Michael Debabrata Patra, deputy governor of Reserve Bank of India, said in his speech at an event. “Overall, tokenised deposits may provide benefits of increased liquidity, cost effectiveness, improved accessibility (24×7), fractional ownership and quick settlements,” Patra said, speaking at the International Association of Deposit Insurers (IADI) Asia Pacific Regional Committee (APRC) International Conference, hosted by Deposit Insurance and Credit Guarantee Corporation (DICGC). The primary function of deposit insurance is to stabilize the financial system in case of bank failures by assuring depositors they will have immediate access to their insured funds even if their bank fails. Deposit tokens can be either bearer-like instruments, which are transferable, or non-transferable claims, which are settled in central bank money or wholesale central bank digital currency (CBDC), Patra said. India started a pilot for wholesale CBDC (e₹-W) in November 2022 and retail CBDC (e₹-R) in December 2022. The nation is also leveraging its digital public infrastructure to be at the forefront of the digital revolution sweeping the world. “From the user’s perspective, tokenised deposits should be inter-operable with different systems, provide the same level of trust and confidence as other forms of money and should also comply with the “singleness of money” – the same value as other forms of money. Tokenised deposits may have various use cases across domestic and cross-border payments, trading and settlement,…

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Filed under: News - @ August 21, 2024 5:22 am