TCS to help central banks in digital currency launch

India's largest software services provider, Tata Consultancy Services on Tuesday said it has updated its Quartz solution to enable central banks and financial institutions to support the entire lifecycle of Central Bank Digital Currency (CBDC) issuance, book-keeping and transactions.

TCS says its Quartz solution provides the capability to issue, trade and settle a variety of traditional as well as tokenised assets, and handle payment transactions. It bridges the conventional and digital world, helping organisations manage issuance and transactions of various kinds of digital assets, without the need for a central third party, the company says in a statement.

With the enhanced solution, central banks will be able to manage the issuance and distribution of CBDCs while commercial banks can transact with other banks and payment services providers using CBDCs as well as offer their customers the ability to hold CBDC balances, the IT company says.

"Central banks around the world are experimenting with CBDCs in their efforts to transform payments and settlements and create an open and safe monetary system that encourages innovation. We have extended the capabilities of our Quartz solution to help our customers in central banking, financial services, payments, and other industries to adapt to this strategic transformation," says Vivekanand Ramgopal, president, BFSI Products and Platforms, TCS.

This comes four days after the Reserve bank of India (RBI) released a concept note on Central Bank Digital Currency (CBDC), saying it will soon commence pilot launches of the Digital Rupee (e₹) for specific use cases.

The Reserve Bank broadly defines CBDC as the legal tender issued by a central bank in a digital form. It is akin to sovereign paper currency but takes a different form, exchangeable on par with the existing currency and shall be accepted as a medium of payment, legal tender and a safe store of value. CBDCs would appear as liability on a central bank's balance sheet.

CBDCs would not be mined like private cryptocurrencies, the RBI said last week. Only the central bank would be authorised to issue the CBDC.

The digital equivalent of government-issued bank notes, a CBDC can help a central bank move towards a globalised, secure, cost-effective, and traceable payments settlement system, while also promoting financial inclusion and helping counter threats that can arise from unregulated cryptocurrency markets, the IT firm says.

The use of distributed ledger technology in a permissioned blockchain model makes CBDC deployment architecturally different from other crypto assets, while its real-time connectivity between market participants will ensure instant payments and reduced transaction costs, it adds.

The Quartz solution's configurable account structure is designed to bring in flexibility to support each country or region's CBDC adoption model guided by the local monetary policy and financial inclusion strategies, the IT services provider says. This account structure allows CBDC balances to be held in consolidated as well as segregated form, along with near real-time synchronisation with central bank systems.