India Begins CBDC Pilot Today
Reserve Bank of India has begun first phase of testing for its digital rupee in the wholesale sector. Nine commercial banks will participate in the e-rupee trial by conducting interbank settlements .
The Reserve Bank of India (RBI), India’s central bank, announced on Monday that it will begin a pilot program for the nation’s digital currency — e-Rupee — in the wholesale segment on November 1st. Last month, the RBI selected nine commercial banks to participate in its central bank digital currency (CBDC) testing program.
According to the RBI, ‘e-Rupee’ will reduce costs for interbank transactions by “preempting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk” using a central bank-backed asset, thereby making the market more efficient. First phase of the program will test settlement of government securities in secondary market transactions, with future pilots focusing on other areas of wholesale transactions and cross-border payments. RBI also stated that it will be launching an e-Rupee pilot for the country’s retail segment next month in select locations comprising closed user groups of merchants and customers.
The Indian government first revealed plans to launch a central bank issued digital rupee earlier this year along with a 30% tax levy on income generated through sale of digital assets. The e-rupee was developed by US-based Fidelity National Information Service (FIS) under its CBDC Virtual Lab — a platform for central banks to develop and test their digital currencies. The government is also working with the International Monetary Fund (IMF) and the World Bank on framing cryptocurrency regulations.
Majority of global central banks are now developing blockchain-based digital currencies. According to a census by the Atlantic Council’s Geoeconomic Centre, 105 countries, representing 95% of global GDP, are working on launching digital currencies into their economies. A report published by the Bank of International Settlements (BIS) in May attributed the rapid creation and deployment of CBDCs to the emergence of cryptocurrencies and fiat-backed stablecoins.
The nine participant banks in RBI’s CBDC pilot program are; State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, Kotak Mahindra Bank, Yes Bank, IDFC Bank and HSBC.