India will conduct its first retail digital currency pilot on Dec. 1, the central bank said on Tuesday, expanding the test to assess the creation and distribution of the e-rupee in the South Asian market a month later with a closed group of customers and traders it started evaluating the CBDC for the wholesale segment.
Four local banks – State Bank of India, ICICI Bank, Yes Bank and IDFC – will participate in the initial phase of the pilot project in four cities (Mumbai, New Delhi, Bengaluru and Bhubaneswar). The Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank will “subsequently” join the pilot, the Reserve Bank of India said. The pilot project will eventually expand to the cities of Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla.
“The scope of the pilot can be incrementally expanded as needed to include additional banks, users and locations,” it said.
The central bank hopes to reduce the economy’s reliance on cash, enable cheaper and smoother international settlements, and protect people from the volatility of private cryptocurrencies, RBI officials have said in recent quarters. Based on the test results, the central bank will experiment with additional features and applications of the digital rupee in future pilots, it said.
The Central Bank of India has pushed hard in recent years to get its citizens to avoid crypto trading. Despite a ruling from the country’s Supreme Court, the central bank continues to force banks to look into crypto platforms in India, a move that has made the rise a nightmare for the firms involved, people with direct knowledge of the matter said.
Amid the collapse of FTX that further wiped out the value of several cryptocurrencies, Rajeev Chandrasekhar, India’s Minister of State for Electronics and Information Technology, tweeted that Indian investors had exited crypto due to the “prudent guard rails of taxation and exchange controls.” should thank Prime Minister Narendra Modi for “his foresight and in doing so saving him from this crypto meltdown and losses.
As a result of the insecurity, the local ecosystem has shifted some talent overseas, and a growing number of local entrepreneurs are building for the foreign markets, avoiding serving customers in India, the world’s second largest internet market.
Top crypto firms like Coinbase and Polygon, along with local exchanges CoinDCX, CoinSwitch Kuber and WazirX, formed a new industry body this month to foster dialogue between key stakeholders and raise awareness of web3, months after becoming the largest local crypto advocacy group was dissolved.
The limited launch of the e-rupee comes at a time when several governments around the world are testing digital versions of their currencies. Singapore’s monetary authority said in late October that it would be testing a digital version of the local dollar. The central banks of China and the Bahamas have also been experimenting in this area. The National Bank of Kazakhstan is planning to integrate its CBDC into the BNB chain, crypto giant Binance said earlier.
However, some have raised concerns about the unchecked proliferation of digital currencies.
Jeremy Fleming, the director of Britain’s Government Communications Headquarters, recently warned that Beijing aims to use a range of technologies, including digital currency, to control markets and people. Beijing’s efforts to build a central bank digital currency could allow it to monitor transactions for repressive means and enable it to evade international sanctions in the future, he added.
“Users can trade with e₹-R via a digital wallet offered by participating banks and stored on mobile phones/devices. Transactions can be both person-to-person (P2P) and person-to-merchant (P2M). Payments to merchants can be made via QR codes displayed at merchant locations. The e₹-R would offer features of physical cash such as trust, security and settlement finality. As in the case of cash, it will not earn interest and can be converted into other forms of money such as deposits in banks,” the Reserve Bank of India said in a press release.