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November 1, 2022
The Reserve Bank of India (RBI) is launching its first pilot of a digital rupee on November 1, with the participation of nine banks. The pilot will focus on the use of the digital currency for the settlement of secondary market transactions in government securities and the central bank hopes that the pilot will make the inter-bank market more efficient and reduce transaction costs by eliminating the need for settlement guarantee infrastructure or collateral. The participating banks include the State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, Yes Bank, IDFC First Bank, and HSBC.
In addition to the wholesale pilot, the RBI also plans to launch a retail pilot for the digital rupee within a month in select locations across India. The retail pilot will involve select participation in closed user groups comprising customers and merchants.
The RBI's move to launch a digital rupee comes as more than 110 central banks globally consider the use of central bank digital currencies (CBDCs). The motivation to float CBDCs has been driven in part by the popularity of financial technology, including cryptocurrencies such as Bitcoin and Ethereum. In response, the Reserve Bank of India decided to ban cryptocurrencies in favor of the digital rupee.
According to a press release issued by the RBI, future pilots of the digital rupee will focus on other wholesale transactions and cross-border payments and the findings from the initial pilot will be taken into account when designing these future trials.
The use of CBDCs is being explored by 105 countries representing over 95% of global GDP, according to the Atlantic Council's Geoeconomic Centre. A report from the Bank of International Settlements in May showed that nine out of 10 central banks globally are exploring CBDCs. The report stated that the emergence of stablecoins and other cryptocurrencies have accelerated the development of CBDCs.
In contrast, the United States has not yet decided whether to issue a central bank digital currency. Federal Reserve Chairman Jerome Powell recently stated that a digital dollar will take at least a couple of years to develop while some lawmakers in the US have expressed concerns about the potential risks and implications of a digital dollar.
In addition to the wholesale pilot, the RBI also plans to launch a retail pilot for the digital rupee within a month in select locations across India. The retail pilot will involve select participation in closed user groups comprising customers and merchants.
The RBI's move to launch a digital rupee comes as more than 110 central banks globally consider the use of central bank digital currencies (CBDCs). The motivation to float CBDCs has been driven in part by the popularity of financial technology, including cryptocurrencies such as Bitcoin and Ethereum. In response, the Reserve Bank of India decided to ban cryptocurrencies in favor of the digital rupee.
According to a press release issued by the RBI, future pilots of the digital rupee will focus on other wholesale transactions and cross-border payments and the findings from the initial pilot will be taken into account when designing these future trials.
The use of CBDCs is being explored by 105 countries representing over 95% of global GDP, according to the Atlantic Council's Geoeconomic Centre. A report from the Bank of International Settlements in May showed that nine out of 10 central banks globally are exploring CBDCs. The report stated that the emergence of stablecoins and other cryptocurrencies have accelerated the development of CBDCs.
In contrast, the United States has not yet decided whether to issue a central bank digital currency. Federal Reserve Chairman Jerome Powell recently stated that a digital dollar will take at least a couple of years to develop while some lawmakers in the US have expressed concerns about the potential risks and implications of a digital dollar.