MUMBAI (Reuters) – The Reserve Bank of India will soon begin limited pilot launches of a central bank-backed digital rupee for specific use cases, it said in a concept paper released on Friday.
The RBI has been exploring the pros and cons of a central bank digital currency for some time and is working on a strategy to implement it in a phased manner, he said.
Use cases are being explored for an electronic rupee so that there is minimal or no disruption to the financial system, the RBI added.
In February, the Indian government announced that a digital rupee would be launched in this fiscal year.
The discussion around a central bank-led digital currency has gained traction in a number of countries as cryptocurrencies have become popular.
“It is the responsibility of the central bank to provide its citizens with a risk-free central bank digital currency that will provide users with the same currency trading experience in digital form, without any of the risk associated with private cryptocurrencies,” he said. said the RBI.
The bank also indicated that it could consider both retail and wholesale digital currency, saying there was merit in both.
In its wholesale form, a digital currency could make settlement systems more efficient and secure, RBI said, while a retail electronic rupee would provide safer means of digital payment for citizens.
The digital rupee seeks to replicate the characteristics of cash and therefore would not pay interest, unlike bank deposits. It would also provide “reasonable anonymity for small-value transactions akin to the anonymity associated with physical silver,” the RBI said.
The results of the pilot projects will feed into the final design of the e-rupee, the RBI said when releasing the concept paper.
(Reporting by Ira Dugal; Editing by Saumyadeb Chakrabarty and Dhanya Ann Thoppil)