India’s much anticipated Digital Rupee has been launched for the wholesale segment on a pilot basis. The use case for Digital Rupee in wholesale will be the settlement of transactions in government securities in the secondary market, the RBI said in a statement.
“The use case for this pilot (wholesale segment) is settlement of secondary market transactions in government securities. Use of e₹-W is expected to make the inter-bank market more efficient,” the RBI said.
Indian central bank will also launch a similar pilot for the retail segment within a month in select locations and closed user groups involving only customers and merchants.
Using the digital rupee will bring more efficiency to the interbank market and reduce transaction costs by removing the need for settlement guarantee requirements. It will be backed by the central bank money – Digital Rupee.
The central bank will focus on other kinds of transactions and cross-border payments in future pilots in the wholesale segment. A total of nine banks — three public sector banks, five private banks, and one international bank (HSBC) will participate in the initiative.
Early last month, RBI issued a concept note on the upcoming Indian CBDC. It said that launching the pilot is to educate the people about digital money and the Digital Rupee. The benefits of using the digital rupee include efficiency in the payments system, reduction in operational cost of managing cash, boosting efficiency in cross-border payments, and letting the people benefit from using digital cash, it said in the concept note.
Indian Finance Minister Nirmala Sitharaman officially announced the Indian CBDC launch during her budget speech in February. The delineation of CBDC from the proposed Cryptocurrency Regulation Bill was believed to be a masterstroke by the present government. It was supposed to provide the legal framework for the ban on cryptocurrencies and the launch of the Indian CBDC. But given industry stakeholders’ highly polarised opinions on the ban on cryptocurrencies, the government dropped the crypto bill. It paved the way for the launch of CBDC by amending the RBI Act.
However, the RBI has been highly cautious about the launch of the Digital Rupee. Earlier this year, a report said it favoured a graded approach that doesn’t affect the payment and settlement system or any other government monetary policy objectives.
Source: Read Full Article