The Reserve Bank of India (RBI) will soon launch pilot tests for its upcoming digital rupee in a bid to increase awareness around its Central Bank Digital Currency (CBDC).
The country’s central bank announced the news on Friday, detailing that the digital rupee will be available for specific use cases during the pilot. In a statement, the RBI said the pilot program will help create awareness around the planned features of the digital rupee.
“It explains the objectives, choices, benefits, and risks of issuing a CBDC in India. The note also seeks to explain the Reserve Bank’s approach towards the introduction of the CBDC,” the central bank reportedly said.
The RBI has also released a concept note for the digital rupee, which talks about key aspects of the CBDC, including its technology and design, potential use cases of the digital rupee, issuance mechanisms, and more. In addition, it explores how the introduction of a CBDC would impact the banking system, monetary policy, financial stability, and privacy issues.
“As the extent and scope of such pilot launches expand, RBI will continue to communicate about the specific features and benefits of e₹, from time to time,” the RBI said.
The country’s Finance Minister Nirmala Sitharaman had previously announced the launch of the digital rupee in her 2022-23 budget speech earlier this year. The announcement marked another clear indication that the Indian government is determined to launch a CBDC.
Addressing the Indian parliament, Sitharaman was quoted saying that the digital rupee will “lead to a more efficient and cheaper currency management system. It is therefore proposed to introduce the digital rupee using blockchain and other technology to be issued by the Reserve Bank of India.”
The RBI’s Harsh Stance Against Cryptocurrencies
Despite its push for a CBDC, the RBI has long maintained a harsh stance toward digital assets, arguing that the nascent asset class has no underlying value. The central bank has constantly warned investors and the government against crypto, citing volatility as well as risks of fraud and scams.
Earlier this year in July, the central bank asked the Indian Government to ban cryptocurrencies in the country, citing the “destabilizing” effect of this asset class on monetary stability. “The RBI is of the view that cryptocurrencies should be prohibited,” Sitharaman said in Parliament on July 18.
At the time, Sitharaman clarified that the RBI does not view cryptocurrencies as currencies, saying that every modern currency needs to be issued by the government or central bank. She claimed the value of cryptocurrencies rests solely on the speculations and expectations of high returns, which is why they have de-stabilising effects.