India’s RBI Launching Pilot Digital Rupee Project
(11 October 2022 – India) The Reserve Bank of India (RBI) is commencing a limited pilot launch for their digital currency which will be referred to as the “e-rupee”.
The RBI is exploring the option of implementation of an account-based central bank digital currency (CBDC) for the wholesale segment and token-based currency for the retail sector, it said in a paper released on Friday. A CBDC is aimed to complement, rather than replace, current forms of money and is envisaged to provide an additional payment avenue to users, not to replace the existing payment systems," the bank said
The digital rupee seeks to replicate the features of cash and hence would not pay out interest, unlike bank deposits. It would also provide "reasonable anonymity for small value transactions akin to anonymity associated with physical cash," the RBI said.
The RBI could consider a "token-based" retail CBDC since they are comparable to cash, while a wholesale CBDC could be "account-based." Further, the e-rupee could be issued via banks as intermediaries, the RBI said. The central bank remains open to different technology options, it added. The CBDC holds a lot of promises by way of ensuring transparency, and low cost of operation among other benefits and the potential to expand the existing payment systems to address the needs of a wider category of users.
The RBI acknowledged that privacy and data protection were a matter of concern when it comes to designing CBDCs. “Ensuring anonymity for a digital currency particularly represents a challenge, as all digital transactions leave a trail. Clearly, the degree of anonymity would be a key design decision for any CBDC and there has been significant debate on this issue,” the note said.
“In a rather roundabout way, the RBI acknowledges India’s love for crypto by saying that CBDCs will provide the public with the benefits and features of crypto without the associated risks,” said WazirX Crypto Exchange Vice President, Rajagopal Menon.
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