RBI operationalizes pilot phase of central bank digital currency-wholesale

1 Nov 2022 , 04:29 PM

The Reserve Bank of India, in a statement, said that it shall commence the first pilot in the Digital Rupee – Wholesale segment (e&8377;-W) on 1 November 2022. The central bank said that nine banks, viz., State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC have been identified for participation in the pilot. The use case for this pilot is settlement of secondary market transactions in government securities. Use of e&8377;-W is expected to make the inter-bank market more efficient. Settlement in central bank money would reduce transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk. Going forward, other wholesale transactions, and cross-border payments will be the focus of future pilots, based on the learnings from this pilot. The first pilot in Digital Rupee – Retail segment (e&8377;-R) is planned for launch within a month in select locations in closed user groups comprising customers and merchants,? the RBI said in a statement. In its concept note released on 7 October 2022, the RBI said that the Central Bank Digital Currency (CBDC) is a digital form of currency notes issued by a central bank. The CBDC is a legal tender issued by a central bank in a digital form. ?It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. Only its form is different,? the RBI reportedly stated. Though the idea of a CBDC is inspired by Bitcoin, they are different from crypto assets, which do not possess legal tender status and are not issued by the state. The government has already said that private cryptocurrencies will never be legal tender. The RBI has been strongly opposing private cryptocurrencies as they could have implications on national security and financial stability. This is not the case with digital currency. On the difference between a digital rupee and using a mobile wallet, media reports stated that in the case of a digital rupee instead of holding a note, one would be holding a digital currency in ones phone and it would be with the central bank and from there it would be transferred to any merchant. Powered by Capital Market – Live News