Indian Central Bank announces the launch of digital rupee pilot project

The regulator noted that the digital currency could be used for both retail and wholesale payments

09.10.2022 - 07:00

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What’s new? The Reserve Bank of India (RBI) published a report on the central bank digital currencies (CBDC), saying that it will soon begin testing a prototype of the digital rupee. The Central Bank said that it will periodically disclose information about the functions and benefits of the new type of asset. The regulator also added that CBDC can be used for both retail and wholesale payments.

RBI report

What else is known about the initiative? The report describes two models for issuing and managing CBDCs: direct (one-tiered) and indirect (two-tiered). The former makes the central bank responsible for managing all aspects of the digital currency system, such as issuance, account maintenance, and transaction verification. The indirect model involves other intermediaries (banks and any other service providers) in addition to the Central Bank.

“RBI broadly defines CBDC as the legal tender issued by a central bank in a digital form. It is akin to sovereign paper currency but takes a different form, exchangeable at par with the existing currency and shall be accepted as a medium of payment,” the document said.

Indian Finance Minister Nirmala Sitharaman said back in February that the digital rupee could be launched in the fiscal year 2022-2023. She later noted the convenience of CBDC in conducting a large number of international transactions.

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