Digital Rupee (CBDC-R)

Main article: National Cryptocurrencies (CBDC)

History

2024: India's Central Bank admits digital rupee failure

In late June 2024, the Indian Central Bank confirmed a rapid decline in digital rupee (CBDC-R) transactions. In fact, this electronic currency turned out to be unnecessary, which means the failure of the project.

The Reserve Bank of India is testing CBDC-R from December 2022: it was assumed that the digital rupee will become an alternative to cash. A year later, the regulator announced that the number of daily transactions using electronic currency reached 1 million. However, this indicator was obtained artificially thanks to agreements with commercial banks. In particular, financial institutions paid salaries to their employees in digital rupees. CBDC-R holders were incentivized with lotteries, prize draws, elevated cash back and free service.

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According to Reuters, after the curtailment of the support program, the number of daily transactions using the digital rupee decreased to about 100 thousand, that is, it collapsed 10 times. But even this indicator is supported by the fact that banks have retained the payments of part of the benefits through CBDC-R. In other words, market participants say, the natural need for an electronic rupee from the population and business is small.

The stimulation of transactions using CBDC-R was explained by the Reserve Bank of India's desire to "test the stability of the system on a large scale." Once this phase of e-currency adoption is completed, the regulator will focus on developing scenarios for digital rupee use as well as testing the technology. CBDC-R is expected to gain popularity as new services are introduced to save time and improve the convenience of various financial transactions.^[1]

2022

Start of pilot use in the retail market

On December 1, 2022, India began using the digital rupee (CBDC-R) for settlements in the retail market as part of the first phase of a pilot project in a closed group of electronic currency users.

The Reserve Bank of India launched e-currency settlements initially in four cities: New Delhi, Mumbai, Bengaluru and Bhubaneswar. State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank are involved in the project.

India begins testing digital rupees

In early October 2022, the Reserve Bank of India (RBI) released a document announcing digital rupee (E-Rupee) testing. It is assumed that the emergence of such a currency will open up new opportunities both for the financial sector of the country, and for business representatives and ordinary citizens.

The idea of ​ ​ introducing national digital currencies is being worked out by many states, including Russia, China and South Korea. These assets, unlike cryptocurrencies like bitcoin, should be controlled by the central bank of each country. The introduction of digital rupees, according to the Indian regulator, will save significant funds on the production of traditional banknotes. In addition, cross-border payments will be simplified. Moreover, electronic rupees will be freely converted into regular cash.

India begins testing digital rupees

But there are also a number of difficulties. These are, in particular, certain issues related to financial stability, monetary policy and the structure of the financial market. In addition, the control of digital transactions can be a deterrent: many people in India prefer cash because it provides anonymity. Another problem is the need to ensure that digital rupees can be used without access to the Internet. The fact is that out of the country's 1.4 billion population, 825 million people are provided with access to the Network. The solution to the issue can be the use of local digital wallets (for example, in the form of a smartphone application) or the ability to send digital money via Bluetooth.

A possible obstacle also lies in the fact that the authorities will have to ensure for bank accounts containing digital currency, all the same advantages that are available for ordinary accounts.^[2]

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