In a document published on Friday, the Reserve Bank of India proposed a phased trial of a version of a Central Bank Digital Currency. RBI will soon start the pilot launch of the digital rupee for specific use cases.
India’s central bank described its goals for the e-rupee, a digital counterpart of the rupee, in the document that was released as a “concept note.” Additionally, it outlined the justification for the creation of a CBDC (Central Bank Digital Currency) as well as the many assessment steps that would be carried out. The concept note also explained the objectives, choices, benefits and risks of issuing a Central Bank Digital Currency.
The Central Bank Digital Currency (CBDC) can be defined as the legal tender issued by the Reserve Bank of India, according to the concept note. Confirmed as Digital Rupee or e-Rupee, RBI’s CBDC is the same as a sovereign currency and is exchangeable one-to-one at par with the fiat currency. The concept note also mentioned this shift would need elaborate planning in terms of scope, cost and timelines to ensure the timely rollout of different phases of CBDC introduction. This would essentially entail testing the wholesale segment first — in the industry and trade — to gauge its acceptance and operational effectiveness before going on to the tougher retail market afterwards.
From Australia to the U.S., central banks around the world are becoming more interested in using CBDCs as an alternative to paper money. The RBI document mentioned China and 16 other nations that are presently testing their own CBDCs as grounds for starting one right away.
“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,” the paper states. “CBDCs are being seen as a promising invention and as the next step in the evolutionary progression of sovereign currency.”
