The Reserve Bank of India (RBI) made an announcement that it is ready to commence the launch of the e-rupee (India’s Digital Currency) for retail payments across India on December 1, 2022.
India’s Central Bank stated that the pilot phase will be achieved within some designated locations in a restricted group that comprises both users and traders. RBI also hinted that the e-rupee will be distributed by using local banks as middlemen and released in the same denominations as fiat currency.
The RBI stated that “the pilot will assess the resilience and viability of the entire process of digital rupee production, distribution, and retail usage in reality.” After its inception, the e-rupee cannot be used to accrue interest, but it does have the unique ability to be converted into other types of currency such as a bank deposit when necessary.
Users can also store the e-rupee in their mobile phones/electronic devices and purchase goods and services using a digital wallet that is provided by partner banks. RBI said it will later commence testing of other features in the e-rupee, based on experience gained from this pilot phase.
The testing will commence in two phases with banks such as Yes Bank, IDC First Bank, ICICI Bank, and State Bank of India commencing the first phase across four different cities in India.
The Development of CBDC
The RBI gave a statement in a blog that it will begin the test of the e-rupee whole pilot program in November. The e-rupee is expected to make interbank market transactions more straightforward and productive. The phase will commence by using the e-rupee to settle secondary market government securities.
The Federal Reserve Bank of New York has also keyed into the promotion of the Central Bank Digital Currency (CBDC) by announcing a partnership with the Monetary Association of Singapore (MAS) in an effort to investigate the potential use of the CBDC to carry out multi-currency international wholesale payments.
The collaboration will entail conducting a series of tests known as “Project Cedar Phase II x Ubin Plus” to assess the possibility of employing CBDCs for wholesale worldwide payments. The experiment is planned to use wholesale CBDCs for cross-border transactions, with the goal of lowering the risk associated with such transactions, which is a primary source of friction in cross-border transactions involving various currencies.
