India to trial retail digital currency on 1 December

India to trial retail digital currency on 1 December

India will embark on first retail digital currency pilot on Dec. 1, the central bank said on Tuesday, extending the test to assess the creation and distribution of the electronic rupee in the South Asian market with a closed group of customers and merchants a month later began evaluating CBDC for the wholesale segment.

Four local banks – State Bank of India, ICICI Bank, Yes Bank and IDFC – will participate in the initial phase of the pilot project in four cities (Mumbai, New Delhi, Bangalore and Bhubaneswar). Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank will join the pilot “later,” the Reserve Bank of India said. The pilot will eventually be expanded to cover the cities of Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla.

“The scope of the pilot can be gradually expanded to include more banks, users and locations as needed,” he said.

The central bank hopes to reduce the economy’s reliance on liquidity, enable cheaper and smoother international deals and protect people from the volatility of private cryptocurrencies, RBI officials have said in recent quarters. Based on the test results, the central bank will test additional features and applications of the digital rupee in future pilot projects.

India’s central bank has spent the past few years lobbying for its citizens to avoid trading cryptocurrencies. Despite a ruling by the country’s highest court, the central bank continues to force the hand of banks not to engage with crypto platforms in India, a move that has made the ramp a nightmare for the firms involved, people with direct knowledge of the firm said. question .

Amid the FTX crash, which has further wiped out the value of several cryptocurrencies, Rajeev Chandrasekhar, India’s minister of state for electronics and information technology, tweeted that Indian investors have exited cryptocurrencies due to “cautious taxation and exchange control guardrail” of the government should thank Prime Minister Narendra Modi for “his foresight and thus being saved from this collapse and losses of cryptocurrencies.

In the wake of the uncertainty, the local ecosystem has seen some talent move outside the country and a growing number of local entrepreneurs building for overseas markets and avoiding serving customers in India, the world’s second largest internet market.

Major crypto firms, including Coinbase and Polygon, as well as local exchanges CoinDCX, CoinSwitch Kuber and WazirX, established a new industry body this month to foster dialogue among key stakeholders and raise awareness of the Web3, months after disbanding of the largest local cryptocurrency advocacy group.

The limited rollout of the e-rupee comes at a time when governments around the world are experimenting with digital versions of their currencies. Singapore’s Monetary Authority said in late October that it will test a digital version of the local dollar. The central banks of China and the Bahamas have also experimented in this area. The National Bank of Kazakhstan plans to integrate its CBDC on the BNB chain, cryptocurrency giant Binance said earlier.

But some have expressed concern about the unchecked proliferation of digital currencies.

Jeremy Fleming, director of the UK government’s communications headquarters, recently warned that Beijing aims to use a range of technologies, including digital currency, to control markets and people. Beijing’s efforts to build a central bank digital currency could allow it to monitor transactions for oppressive means and in the future allow it to evade international sanctions, he added.

“Users will be able to transact with e₹-R through a digital wallet offered by participating banks and stored on mobile phones/devices. Transactions can be either person-to-person (P2P) or person-to-merchant (P2M). Payments to merchants can be made using QR codes displayed at merchant locations. The e₹-R would offer characteristics of physical money such as trust, safety and settlement purposes. As with cash, it will not earn any interest and can be converted into other forms of money, such as bank deposits,” the Reserve Bank of India said in a press release.

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