The Reserve Bank of India (RBI) has announced plans to commence pilot testing of the e-rupee, its version of a Central Bank Digital Currency (CBDC), for both retail and wholesale usage.
According to a 50 page Concept Note released by the RBI, CBDC intends to bolster the country’s digital economy, improve financial inclusion and make monetary systems more efficient.
Recently, countries globally have shown an increased interest in CBDC as a more acceptable electronic form of currency to paper currency. The paper cites the U.S., China, and 15 other countries which are currently developing their version of a CBDC.
“Currently, we are at the forefront of a watershed movement in the evolution of currency that will decisively change the very nature of money and its functions,” states RBI. “CBDCs are being seen as a promising invention and as the next step in the evolutionary progression of sovereign currency.”
E-Rupee, planned to be rolled out in limited pilot launches, is currently seen as an additional currency to the existing paper currency and not a replacement. However, the digital currency will be promoted as an alternative to cryptocurrencies.
As things stand, two versions of CBDC are being worked out: one will be directly used by the people for retail payments, and another will be used for bank settlements and wholesale payments.
The RBI believes cryptocurrencies pose a stability risk to the macroeconomic and financial environment of the nation because it limits the government’s ability to implement monetary policies, furthering the requirement of a CBDC.
“CBDCs will provide the public with benefits of virtual currencies while ensuring consumer protection by avoiding the damaging social and economic consequences of private virtual currencies,” the report reads.
India first announced CBDC in February this year with the ultimate aim to make payments more robust and efficient.
