On his final day in office, Reserve Bank of India (RBI) Governor Shaktikanta Das highlighted the transformative potential of India’s central bank digital currency (CBDC), also known as the digital rupee. During his farewell speech on December 10, Das reflected on his six-year tenure, emphasizing the RBI’s strides in adopting emerging financial technologies.
India’s Leadership in CBDC Innovation
Governor Das spotlighted several groundbreaking initiatives spearheaded by the RBI, such as the creation of the RBI Innovation Hub in Bengaluru and the launch of a regulatory sandbox to foster fintech advancements. These initiatives have positioned India as a frontrunner in the CBDC landscape.
Unlike many central banks that are still exploring the concept of digital currencies, India has moved forward with active pilot programs for both retail and wholesale CBDC applications. Currently, the pilot includes 16 banks and extends beyond basic payments, exploring offline transactions and programmable features.
Das described programmability as a game-changer for financial inclusion, ensuring funds are delivered precisely to intended beneficiaries. However, despite these innovations, the digital rupee’s adoption remains limited. By late June, only one million retail transactions had been completed, supported by local banks incentivizing usage, such as partially disbursing salaries in digital rupees.
Striking a Balance Between Innovation and Caution
India’s ambitious goal of achieving one million CBDC transactions per day has encountered challenges, with scalability concerns slowing progress. RBI Deputy Governor T. Rabi Sankar stressed the need for a cautious and deliberate approach to fully understand the underlying technology before expanding usage nationwide.
India’s CBDC roadmap also includes plans for cross-border payments. In November, the RBI initiated efforts to collaborate with trading partners across Asia and the Middle East to integrate its instant settlement platform. Current agreements involve countries like Sri Lanka, Bhutan, and Nepal, where the system is already operational.
Reports suggest that CBDCs could eventually become the primary settlement mechanism for cross-border payments, marking a significant milestone in India’s digital currency strategy.
India’s Role in Global Crypto Adoption
India’s CBDC progress aligns with its leadership in cryptocurrency adoption. According to blockchain analytics firm TRM Labs, India ranks first globally in this space, reflecting the growing acceptance of digital assets.
Despite this, stringent regulations, including a 30% flat tax on profits from Virtual Digital Assets (VDAs) and a 1% tax deducted at source on crypto sales, present hurdles for the broader adoption of digital currencies.
As Shaktikanta Das steps down, his tenure underscores India’s efforts to balance innovation with caution, positioning the nation as a key player in the evolving global financial landscape.
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