The E-Rupee trial in the retail segment by RBI has clocked around 16,000 testers. The digital currency is currently designated CBDC-R (e₹-R). There are currently two pilots underway, one for retail and wholesale segment each. The retail pilot has done processing of Rs 64 lakh worth of transactions.
After thorough research and sharing a concept note, the RBI last year went ahead to launch its digital currency to counter the “threat” posed by the huge attraction of cryptocurrencies like Bitcoin, which are so volatile in this stage of their evolution that no one can advise any investment. Scams proliferate as anyone can issue their own coin living thousands of miles away in another country.
As per reports, the wholesale CBDC pilot that began in November 2022 has done average daily transactions of Rs 200 crore.
With all countries in the queue to launch their own CBDCs, not always to counteract crypto, India too has gone ahead and come up with a “hybrid” solution – a digital currency that keeps the “risky” highways of decentralized blockchain away from retail use. As per an unknown source in a media report, blockchain is deployed in the internal bank to central bank network, but the retail use of CBDC is over a secure API.
The addition of a new form of Rupee is bound to increase confusion, though it might be preferable to the mayhem that will ensue when dozens or hundreds of cryptocurrencies get into action. The recent adoption of Bitcoin and Tether by the City of Lugano is a carefully planned and promoted venture that excludes the chaos with just three cryptos used in a customer reward-driven scheme.
The similarity and differences between the e-rupee and electronic bank transfers will take some time to be understood. The use of a separate wallet for e-rupee will help differentiate e-rupee, but then it is likely to be confused with other UPI based wallets.
The main difference in e-rupee and what users see in their online bank accounts is that the e-rupee goes directly from the user’s wallet in the phone to the recipient’s wallet. This is not the same as online bank transfers and UPI/BHIM wallets, where the transaction is processed by the concerned banks. A user can send their e-rupee to their bank account where it will be converted to the conventional Rupee.
Will e-rupee allow new money to be printed?
Since any addition of new money by a country adds to inflation or loss of value of the currency, it is not currently clear if there will be addition of new money. As per a report, e-rupee will be part of the “total currency in circulation”. It will be like cash – with no bank involvement in transfers – at least of small amounts, it will be safe to say today though more clarity will emerge later – and thus anonymous as to who sent money to whom. Big money is always tracked by big brother.
Will there be a separate KYC for e-rupee?
There are no specific mentions of a KYC that is unique to using the e-rupee. The participating banks will issue the wallets and so this may not arise as a specific issue to be addressed.
Will the “unbanked” be able to use the e-rupee?
A fruit seller near the RBI in Mumbai has been enlisted in the retail pilot as per a media report. It is not clear if he also has a bank account.
A major promise and marketing spiel of crypto projects, including scams, was/is that the billions around the world without a bank will be able to access financial products. DeFi is a major sub-industry of the crypto world.
For the e-rupee, it may not be a hurdle. However, with banks again ruling the roost, it is not clear if users would need a bank account to be able to use the new e-rupee app that will be offered when the e-rupee goes mainstream.
Risks of authenticity of e-Rupee – is my e-Rupee genuine?
As per an update from RBI Governor Shaktikanta Das, the RBI is driving carefully with CBDC, as there are always risks of imitations and scams.
Knowing one’s country well is mandatory for safe driving.
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