As worries about the volatility and oversight issues that have roiled cryptocurrencies globally continue to mount, India is moving forward with plans to create an e-rupee in an effort to have a stable central bank digital currency.
Beginning this month, the Reserve Bank of India launched its first e-rupee pilot program, enabling some institutions to settle government bond secondary market transactions using the digital rupee. The RBI now intends to begin testing the retail applications of the Indian rupee’s digital version.
“Since it is a digital form of legal tender backed by the central bank, it doesn’t have volatility risks like the available cryptocurrencies,” says Supratik Nag, vice president, product management at Maveric Systems, a digital transformation consulting company, headquartered in Chennai.
“It could help reduce transaction costs, increase financial inclusion, and act as a friction-free and inexpensive mode of payment.”
China, which is experimenting with a digital yuan, is one of many nations looking into the usage of central bank digital currencies (CBDCs).
When releasing the nation’s annual budget in February, India’s Finance Minister Nirmala Sitharaman stated that the RBI would introduce the blockchain-based digital rupee during the current fiscal year, which runs through the end of March.
The government has long expressed reservations about private cryptocurrencies, such as Bitcoin, even while it is embracing a closely regulated central bank digital currency.
It worries that such completely unregulated digital assets could be used to finance terrorism or money laundering due to their anonymity.