The Central Bank of Sri Lanka (CBSL) is looking to conduct a ‘Proof of Concept’ for the implementation of the digital rupee by the end of 2024, a parliamentary committee report said.
According to the Committee of Ways and Means, CBSL has taken the initial step towards implementing the digital rupee through the Real Time Gross Settlement (RTGS) system where the digital rupee can be issued as either wholesale or retail currency.
However, the presence of the RTGS system renders wholesale currency unnecessary, therefore, CBSL is focusing on issuing the digital rupee as a retail currency.
The report said that the CBSL will be looking at establishing a clear regulatory framework for digital currencies, especially mobile-centric Central Bank Digital Currency (CBDCs), which is crucial for ensuring security, compliance, and consumer protection.
Other steps include, collaborating with mobile service providers to ensure a seamless integration of the CBDC into mobile platforms and to address any technical challenges and implementing an exchange for Sri Lankan Rupee digital currency using a suitable technology framework.
CBSL will also grant a set of licenses for state and commercial banks to be the franchisees of the Sri Lankan Rupee digital currency transactions.
Moreover, the committee recommended that launching a CBDC should be approached cautiously, with a comprehensive study and further research on the country’s economy.
“This is crucial to avoid potential negative implications on economic stability, particularly concerning reduced deposits flowing into the banking system,” the committee said.
The Committee also said that although Sri Lanka currently has no digital banks, traditional banks are observing a decline in physical footfall as more individuals choose to perform their transactions using Cash Deposit Machines (CDM), Automated Teller Machines (ATM), and online banking.
Further, the report said that CBSL had investigated the financial aspect of blockchain technology and CBSL had already initiated the storage of KYC (Know Your Customer) information using blockchain technology.