The Reserve Bank of India recently released a report detailing the development and roadmap for the digital finance industry. In this report, the RBI highlights the eRupee central bank digital currency (CBDC) as a key innovation in the industry. The eRupee is similar to cryptocurrency but is regulated by the RBI, making it unique in the digital finance space. It is currently in its advanced trial phase, with the central bank aiming to use it to improve India’s cross-border transactions and elevate the Indian Rupee (INR) to an international level.
According to the report on currency and finance 2023-2024, the launch of the eRupee CBDC is seen as a strategic move to enhance India’s projection of soft power. The RBI believes that utilizing cross-border digital trade policies and digitalization, along with measures to internationalize the INR and the CBDC project, will open up new opportunities for the country. Additionally, the introduction of the CBDC is expected to reduce foreign exchange risks, support seamless international transactions, and manage global liquidity more effectively.
The RBI is also exploring ways to attract foreign direct investments (FDIs) into India’s fintech sector. By expanding the adoption of fintech advancements like the eRupee, the central bank aims to enhance data security, improve the availability of e-payment services, and boost local digital skills. The eRupee is currently being trialed in both the retail and wholesale sectors for Person to Person (P2P) and Person to Merchant (P2M) transactions.
CBDCs like the eRupee are virtual representations of fiat currencies like the Rupee, supported on blockchain networks. This technology ensures that all transactions are recorded on an unalterable blockchain, increasing transparency in the financial system. The use of CBDCs can help banks reduce their reliance on paper notes and further digitize the finance sector. As of June 2024, the report revealed that 50 lakh users and 4.2 lakh merchants were participating in the CBDC retail pilot, indicating growing interest and adoption of the eRupee.
In a conversation with Gadgets360, Sharat Chandra, Founder of EmpowerEdge Ventures, shared his perspective on RBI’s outlook towards the eRupee CBDC. He highlighted the potential of establishing multi-CBDC bridges with nations that have strategic ties with India, which could significantly enhance the internationalization of the Indian Rupee. Chandra also mentioned the possibility of the Digital Rupee operating on UPI infrastructure, similar to the global success of UPI.
The eRupee CBDC holds promise for transforming India’s digital finance landscape and enhancing its position in the global market. The RBI’s focus on utilizing technology to drive financial innovation and inclusion is a step in the right direction towards achieving a more secure, efficient, and internationally competitive digital finance ecosystem.
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