India’s CBDC project reaches five million users:RBI Governor

Key Takeaways

• Das stated that India is not in a hurry to implement a full-scale rollout of the CBDC
• He pointed out that other new use cases aimed at testing features such as anonymity and offline availability are proposed to be rolled out gradually.

On August 26, the Governor of the Reserve Bank of India, Shri Shaktikanta Das, spoke about the progress of India’s digital rupee initiative adding that Central Bank Digital Currency (CBDC) pilot, which began in late 2022, now has five million users and includes 16 participating banks.

Das made these comments during his address at the RBI Global Conference, focusing on digital public infrastructure and emerging technologies.

Das stated that India is not in a hurry to implement a full-scale rollout of the central bank digital currency (CBDC). He highlighted the importance of acquiring a comprehensive understanding of its impact on users, monetary policy, the financial system, and the broader economy before any widespread adoption.

“There should not be any rush to roll out systemwide CBDC before one acquires a comprehensive understanding of its impact on users, on monetary policy, on the financial system, and on the broader economy,” said Governor Das. He stressed that this understanding could only come from more pilot projects.

The Governor added that the actual introduction of CBDC could be phased in gradually over time. “Undoubtedly, CBDC has the potential to underpin the payment systems of the future both for domestic payments and also cross-border payment,” he noted.

Das explained that India’s CBDC pilots include both retail and wholesale segments, with the retail pilot focusing initially on payments. Currently, the RBI is testing both offline payment capabilities and programmability functionalities.

Das also mentioned the potential for CBDC to enhance financial inclusion through its programmability feature. He cited examples such as using purpose-bound money linked to the generation of carbon credits from agriculture and providing tenant farmers with funds that can only be spent on fertilizer or other raw materials.

This would help establish the identity of tenant farmers, who often struggle to get loans due to the lack of land titles. By attaching conditions to the cash, banks can have peace of mind and be more likely to grant credit.

In addition to the ongoing pilots, Das pointed out that other “new use cases aimed at testing features such as anonymity and offline availability are proposed to be rolled out gradually.” He emphasized that the cautious approach aligns with India’s original plans to proceed with CBDC testing smoothly, ensuring that any rollout is backed by thorough understanding and robust data.

Governor Das also touched on India’s broader technological initiatives, such as the Unified Lending Interface (ULI), designed to simplify the credit-granting process. This platform is similar to the Unified Payment Interface (UPI), which has been successful in facilitating faster payments.

India’s stance on CBDCs is reflective of its approach to other digital currencies like Bitcoin. While some agencies have permitted the return of major global crypto exchanges, other regulators have opted not to regulate cryptocurrency transactions comprehensively.

Earlier in August, Pankaj Chaudhary, the Minister of State in India’s Ministry of Finance, stated that the Indian government has no immediate plans to regulate the sales and purchases of cryptocurrencies. “Crypto assets or Virtual Digital Assets are unregulated in India, and the government does not collect data on these assets,” he said.

Several countries apart from India are running pilot programs to assess the viability of CBDCs. CBDCs have already been launched in the Bahamas, Nigeria, and Jamaica among others.

The International Monetary Fund has dubbed CBDCs as “a safe and low-cost alternative” to cash, with almost 60% of countries in the world exploring CBDCs.

While CBDCs are gaining positive traction across the world, some states are also wary of CBDCs. Earlier this year, the US State of North Carolina passed a bill prohibiting state agencies and courts from accepting payments using CBDC. The NC Governor Roy Cooper has vetoed the bill deeming it vague and reactionary.