Tighter cyber security laws needed before rolling out CBDC, says cyber law expert Pavan Duggal

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Central banks across the world including India are talking about launching their own digital currency. The case for digital currency, however, is not as simple as it looks. Is it just the electronic transfer of money or are we looking at something bigger completely re-engineered money working on distributed ledger just like cryptocurrencies? Experts say Central Bank Digital Currency or CBDC will take the application of blockchain to the next level. To discuss its risks and challenges Money9 spoke with cyber law expert Pavan Duggal, who said we have to wait and watch as cybersecurity parameters are not clear yet.

How different will CBDC from the electronic transfer of paper money? Though the digital currency is already there in the form of NEFT digital currency, it is said that CBDC will add another layer with the aim to reach the unbanked population of the country.

Duggal said currently, Section 4 of The IT Act has given a legal sanction for the electronic record. Now the question is when an electronic record gets converted into digital currency. A legal framework for digital currency is needed. There are many other things that need to be clarified before the digital currency is launched. For example, what happens if there is any misuse of digital currencies. Similarly, a redressal mechanism needs to be defined.