Permanently removing transactions will make CBDCs like cash: RBI Governor

Testing of India’s own eRupee digital currency is already in its advanced stages, paving the way for its widespread adoption and use in the coming months. In a recent development, RBI Governor Shaktikanta Das revealed some more complexities about eRupee, while also hinting at what plans the RBI has for this CBDC in the near future. A Central Bank Digital Currency, or CBDC, is a digital representation of a fiat currency like the rupee, backed on a blockchain network.

Das was speaking at the BIS Innovation Summit 2024 in Basel, Switzerland, when he said India’s CBDC will provide the same privacy for transactions that cash notes provide.

“The basic principle is that CBDCs can have the same degree of anonymity as cash, no more and no less. Anonymity can be addressed through law and/or technology. For example, through permanently deleting transactions,” the media reports. quoted As Das says.

India launches its CBDC with testing phase in November 2022. Since then, eRupee has been continuously tested in retail environments operated by several private and public sector banks operating in India. In recent months, banks like ICICI have increased promotion for the digital rupee.

People interested in experimenting with eRupee can do so by accessing their banks’ official apps or seeking necessary assistance from their designated bank relationship manager. They will essentially need to convert some of their money into CBDC and store the eRupee in their digital wallets provided by banks.

The Government of India has enabled interoperability of CBDCs with existing QR codes being used for UPI payments. Through this, CBDC holders can scan the codes provided by merchants or peers and pay them as eRupee.

According to Das, “The benefits of CBDC will be more visible when we enable offline usage and programmability features. One of the main objectives of the pilots is to study changes in consumer behavior compared to bank deposits. “We need many more transactions to understand its macroeconomic implications, especially on monetary policy and the banking system.”

In February this year, RBI had said that CBDC transactions could generate up to Rs. 5.70 crore in the first four months after entering the retail trial phase in 2023.

Earlier in April, the RBI had proposed expanding the CBDC rollout within the retail ecosystem beyond banks. This essentially meant that the Apex Bank has decided to start circulating the digital rupee through payment system operators that are not part of the banking system.

Das had also revealed earlier this year that the RBI is planning to experiment with offline solutions to drive CBDC adoption in parts of India that are not connected to the internet like developed cities.