Digital Rupee

The Reserve Bank of India (RBI) will launch a “limited pilot” for a central bank digital currency (CBDC) in the country soon. On Friday, the regulatory body released a ‘concept note’ on CBDC, dubbed e₹, or Digital Rupee. RBI said that the note “would facilitate a deeper appreciation and understanding of Digital Rupee and help members of public prepare for its use.” For those unaware, a CBDC is a digital form of currency notes issued by a central bank, the RBI in this case. 

The concept note offers an official name for India’s CBDC for the first time — e₹ or Digital Rupee. As per the RBI, the Digital Rupee will offer an additional option to fiat currency. Unlike regular cryptocurrencies such as the Bitcoin (BTC), Ethereum (ETH), or Dogecoin (DOGE), the value of the Digital Rupee will not depreciate or appreciate with time. Essentially, the e₹ is not different from regular banknotes — except that it will be digital in form. The RBI said that since the e₹ is digital, it will be “easier, faster, and cheaper” and have all the “transactional benefits of other forms of digital money.”

The RBI also said that a limited pilot will soon be commenced for the Digital Rupee, to trial specific use cases. An exact date has not been announced yet. However, RBI Deputy Governor T Rabi Shankar said in June that a CBDC will indeed be launched this year, however, the “process of introduction will be gradual” to ensure smooth implementation. The RBI first announced that it was working on its own digital currency in July last year. The latest concept note from RBI falls in line with previous announcements.

As per the note, the RBI’s approach to CBDC is governed by two “basic considerations”. The body is looking to create a Digital Rupee that is “as close as possible” to regular paper currency. Apart from that, the RBI aims to “manage the process of introducing Digital Rupee in a seamless manner.”

Several countries are eagerly jumping on to the CBDC bandwagon. While China became the first large economy to officially test the e-CNY in 2020, looking to execute a nationwide implementation by 2022, several other countries are also running CBDC trials, including the likes of Iran, Hong Kong, Nepal, Canada, the US, and the UK. 

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