Private cryptocurrencies will never replace fiat currency: Nandan Nilekani

He said incidents like the “fall of cryptocurrency exchange FTX in the United States” have shown that private cryptocurrencies aren’t a big threat.

“Because of the rise of private cryptocurrencies, central banks are thinking of digital currencies backed by them – CBDCs (central bank digital currency),” Nilekani, who was speaking at the Bharat Inclusion Summit in Bengaluru, said.

Explaining the use of CBDCs, Nilekani added, “So, why do they need it? For instance, on the wholesale side, especially cross-border settlement, these currencies can further reduce costs. But private crypto currency, I don’t see it as a threat.”

The founding architect of Aadhaar also said that though the Account Aggregator (AA) framework took years to build, it is now on the verge of take-off.

AA-based lending is expected to surge in a big way and availing of credit would be as simple as making digital payments, he said.

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“In 2016, the RBI came out with standards for AA. It took several years to build AA and we are on the verge of take-off. Data-based lending will also take off in a big way. AA-based lending will… reach millions of businesses,” Nilekani, who was in conversation with Sanjay Jain, partner, Bharat Innovation Fund and chief innovation officer, CIIE.co, said “Now, the next big thing will be credit and people will be able to give data. Getting lending will be as simple as making payments. Credit is the heartbeat of the economy,” he said.

While credit is expected to prosper with the AA framework, financial services including insurance and pensions will take some time to pick up, he said.

In the past, Nilekani has said that the AA framework would replicate the success that the Unified Payments Interface (UPI) had with digital payments.

The AA framework will also help small and medium enterprises and individuals access financial services more easily.

“You need digital public infrastructure and make sure that it is accessible to everyone. And then need private innovation on top of it … We have to reduce the cost of things and look at innovative pricing models,” the founding chairman of the Unique Identification Authority of India (UIDAI) said.

On the next frontiers in innovation, Nilekani added that apart from AA, access to services through Indian languages, Open Network for Digital Commerce (ONDC) enabling every shopkeeper to participate in ecommerce, and logistics enablement through warehousing and FASTag will be major disruptions.