The Reserve Bank of India (RBI) has announced that it will commence a pilot for a wholesale version of its central bank digital currency (CBDC) on November 1. Digital rupee pilots for the retail segment will begin within a month.
What’s The Point Of A Digital Rupee?
The Indian central Bank is forging ahead with plans for a digital version of the rupee, referred to as the e-rupee.
According to a Monday announcement, RBI said the pilot for the country’s wholesale CBDC is expected to start on Tuesday. Major banks in India will be involved in the trials, including State Bank of India, Bank of Baroda, ICICI Bank (ICICIBANK), Union Bank of India, Yes Bank, HDFC Bank, HSBC, Kotak Mahindra Bank, and IDFC First Bank.
It will be recalled that the Indian central bank is weighing the release of two versions of a CBDC: one that people would use for making retail payments and another that would be utilized for the settlement of transfers between banks and wholesale transactions.
A digital rupee pilot designed for retail transactions will be introduced within a month in select locations.
The main use case for the upcoming pilot is the “settlement of secondary market transactions in government securities”, the RBI stated. The e-rupee is expected to increase efficiency in the interbank market by optimizing transaction costs.
The Indian government first revealed its plans to roll out a CBDC in February, noting the technology would considerably boost the country’s economy. Earlier this month, the RBI released a detailed concept note to introduce the e-rupee.
In the note, the central bank said the digital rupee would serve as an alternative to cryptocurrencies. The RBI believes that the growing popularity of cryptocurrencies poses a threat to the monetary and fiscal stability of the country.
The CBDC pilot comes when India’s once-burgeoning crypto market has faced tough challenges, including a harsh new 30% tax. Added to that were the global crypto winter, macro factors like rising inflation and the war in Ukraine, and layoffs.
Will The E-Rupee Be A Success?
ZyCrypto has reported exhaustively on the plethora of CBDCs currently under consideration or in development. Thus far, despite an outpouring of hope and promise, only the Bahamas has managed to deploy its national digital currency, the sand dollar, entirely. Nigeria also launched its eNaira last October, but the digital currency has struggled to gain significant traction.
China is quickly pushing ahead with its digital yuan by letting citizens test it in many provinces.
Last month, five speakers at a hearing for the U.S. House Committee on Financial Services voted in favour of the U.S. establishing some digital currency, citing the need to remain a competitive player in the world of digital assets and avoid falling behind China.
The jury remains very much out on whether the e-rupee will be a success or not. The eyes of the world, no doubt, are on the world’s fifth-largest economy as the story unfolds.