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RBI CBDC Digital E-Rupee To Become A Reality

Manoj Nair




The widespread proliferation of Digital Currencies or Cryptocurrencies has led to many Central Banks exploring the possibility of bringing out their own CBDC or Central Bank Digital Currency. China has already started to work on the process and India is not far behind.  

Though the Digital E-Rupee is in its planning stage, its look and appearance will depend significantly upon the outcome of RBI’s pilot trials.

The work on CBDC or the Central Bank Digital Currency in India was started in 2020, and the Reserve Bank Of India released a concept note on Digital E-Rupee on 7th October 2022. The GOI also clarified that it wants to launch the CBDC in its Union Budget. As per the note, the Central Bank will launch a pilot program to launch the digital rupee in India.  

E-Rupee The Digital Rupee

The E-Rupee, or the digital version of the Indian Currency, which the RBI is exploring, will be available in two versions- wholesale for interbank settlement and retail for the public. Users will own the digital rupee in a wallet either with the bank or a third-party service provider.

It is unclear if the Indian CBDC will work on the principles of DeFi, but one thing makes the Indian CBDC a wee bit different from other crypto assets. Most cryptocurrencies, like Bitcoin and Ethereum, are ‘private’ in nature, whereas RBI will entirely control the CBDC.

While Bitcoin (BTC) and ETHJ can be mined, the Rupee CBDC will be issued solely by the RBI. Hence the digital rupee will not be affected by energy or environmental issues. The RBI will issue the e-rupee, and the commercial banks will distribute it.

The retail type of digital E-Rupee is token-based, and the transfer of the money will be effected using your private key to the recipient’s public key, essentially like an e-mail address. However, it must be noted that there will be no interest accrued on the e-rupee. One more crucial aspect is anonymity. While cryptocurrency transactions are anonymous, the RBI has made it clear small amounts can be anonymous but not large amounts.

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