In Q4 2022, India launched a pilot of its central bank digital currency (CBDC), the digital rupee, with a total of thirteen banks participating.
The move, to offer an alternative currency to cash, can be tracked on a digital ledger, and makes digital transactions possible without using credit cards or banks. But according to a recent article from Forbes, there isn’t much demand for this at the moment.
Forbes writer Zennon Kapron notes:
It sounds nice in theory, but thus far – as is often the case with blockchain – the e-rupee looks like a solution in search of a problem… Bankers participating in the wholesale e-rupee pilot interviewed by Reuters said that they have not seen any benefits from use of the CBDC. They emphasized that using it as similar to India’s existing internet-based banking with which users are already satisfied.
Given the marginal benefits for CBDCs highlighted in the trial, the underlying rationale for the development of the digital rupee is so that the central bank can control digital transactions, and retain control over monetary policy. Thus, the idea seems to be to get out ahead of crypto, so that it does not become more entangled in the Indian financial system.
“This dynamic is not dissimilar to the debate over a digital dollar in the United States, which remains in the development and testing phases,” said Steve Murphy, Director of Commercial Payments at Mercator Advisory Group. “There are those who feel that a digital dollar is unnecessary and even those that agree with it for reasons of keeping current with technology will express concerns over the potential method of distribution.”