The Reserve Bank of India is Expanding CBDC While Dismissing Privately Issued Stablecoins

The Reserve Bank of India (RBI) is planning to increase the number of Central Bank Digital Currency (CBDC) transactions to one million per day by the end of 2023, according to Deputy Governor T Rabi Sankar. This ambitious target comes as the RBI currently records around 5,000-10,000 transactions daily with its retail CBDC, the e₹-R.

CBDCs are a type of digital or virtual currency that is issued and regulated by a country’s central bank. They represent a digital form of a country’s fiat currency and are backed by the monetary reserves of that country. CBDCs are designed to operate and function like traditional money but in a digital form, which can be used for everyday transactions, cross-border payments, and other financial operations.

The RBI’s strategy to boost CBDC usage includes leveraging the Unified Payments Interface (UPI) network. “There will be one QR code, and you can swipe the QR code using the CBDC app. If the merchant has a CBDC account, the payment will settle in the CBDC wallet. If the merchant does not have a CBDC account, then there will be an option to make payment using UPI,” Sankar explained.

Currently, 1.3 million customers and 0.3 million merchants are using the retail digital Rupee, with 13 banks offering retail CBDC. These banks have partially rolled out interoperability, allowing the QR code to be scanned using the CBDC app. Full interoperability for CBDC customers using UPI for payments is expected by the end of the month. The RBI also plans to onboard the remaining 20-25 banks to offer interoperability to CBDC customers, although this may take more time.

Sankar also highlighted the potential of CBDCs in reducing costs for cross-border transactions, which currently stand at a high 6% for small value transactions according to World Bank estimates.

In contrast to Sankar’s positive attitude toward CBDC, he warned that stablecoins pose an existential threat to policy sovereignty, particularly for countries like India. Stablecoins linked to underlying currencies, while beneficial to certain economies, could lead to the risk of dollarisation and transfer of seigniorage to private issuers, replacing the use of the rupee in the economy.

Stablecoins are a type of cryptocurrency that are designed to maintain a stable value relative to a specific asset or a pool of assets. Stablecoins can be pegged to a currency. They are often used to provide stability in the highly volatile crypto markets. Examples of these include Tether (USDT) and USD Coin (USDC), which are not issued by a central bank or government, but by private companies, thus weakening the authorities’ control over it.

Sankar suggested that a stable solution would be for every country to have its own CBDC, with a mechanism for these CBDCs to interface and transact with each other.

The RBI is also considering the anonymity aspect of CBDCs, a defining feature of the currency. However, Sankar emphasized that any decisions regarding anonymity must be legally backed and consistent with the Prevention of Money Laundering Act (PMLA).


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RBI and Central Bank of UAE sign MOU on CBDC bridge

The Reserve Bank of India and the Central Bank of UAE have signed a memorandum of understanding (MOU) on collaboration and innovation in financial services, with a focus on central bank digital currency (CBDC) interoperability. The parties will develop a proof-of-concept and pilot program for a CBDC bridge to facilitate remittances and trade, which would reduce costs and increase efficiency of transactions, as well as strengthen economic ties between the two countries.

India and UAE banking officials had discussions in February regarding a rupee-dirham payment system using correspondent banks, which has been under development for a year. The countries currently use US dollars to settle payments. The UAE remains a major source of remittances to India, accounting for 17-18% of the total of around $87 billion, as of July 2022.

India has a domestic digital rupee pilot project with 50,000 users and 5,000 participating merchants, and has been testing its CBDC’s offline functionality. The RBI has also reported that it completed around 800,000 transactions worth $134 million with its wholesale CBDCs.

The UAE launched a nine-part financial transformation program and announced its intention to launch a CBDC for domestic and cross-border use in February. Emirati banks had already participated in the mBridge pilot project, along with banks in Hong Kong, China and Thailand, to use CBDC for cross-border transfers. Additionally, the UAE expects cryptocurrency to “play a major role for UAE trade going forward,” according to the UAE minister of state for foreign trade, Thani Al-Zeyoudi, who spoke at the World Economic Forum in January.

Overall, the MOU between the RBI and Central Bank of UAE will facilitate the development of a CBDC bridge that will enable easier and more cost-effective remittances and trade between India and the UAE. Both countries have been exploring the potential of CBDCs for some time, with India having already launched a domestic digital rupee pilot project and the UAE launching a financial transformation program and mBridge pilot project.


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India to Test Viability of Digital Rupee to Cut Fees When Trading Securities

The Reserve Bank of India (RBI) is launching a wholesale pilot program involving its Central Bank Digital Currency (CBDC) also dubbed the Digital Rupee.


According to a Press Release published by the apex bank, this first pilot phase is centered on the use of the Digital Rupee for the settlement of secondary market transactions in government securities.

The RBI wants to see if the potential legal tender can reduce some of the drudgeries that are being experienced in the inter-bank market and make it generally 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,” the RBI said in the issued release, setting the focus for future pilots by asserting that “other wholesale transactions and cross-border payments will be the focus of future pilots, based on the learnings from this pilot.”

The motivation to float CBDCs has been a central push for many Central Banks around the world. With more than 110 already conducting one form of research into the new form of money. With the evolution of financial technology as popularized by the advent of cryptocurrencies, a scenario that made preempted RBI to move to ban crypto in favor of the Digital Rupee.

India comes off as one of the countries whose RBI has maintained a steady course in the design and development of its Digital Rupee. 

The apex bank has been interfacing with financial institutions and it confirmed that this current wholesale pilot will enjoin participation from Nine banks including but not limited to the State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, Yes Bank, IDFC First Bank, and HSBC have been identified for participation in the pilot.

The RBI said the retail pilot for the Digital Rupee will be launched within a month and will see select participation in select locations across the country.

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RBI Releases Publication of CBDC to be Issued in India

The FinTech department of the Reserved Bank of India (RBI) recently released concept notes on the issuance of its Central Bank Digital Currency (CBDC) in India. 


This was revealed in a tweet from the RBI’s Twitter account on Saturday. The publication simply explained the objectives, options, merits and demerits associated with issuing a CBDC in India otherwise known as the Digital Rupee.

The Central Bank Digital Currency (CBDC) is a digital form of banknote issued by the central bank of a particular country. It is issued based on the specific requirements of any given country.

The launch of the digital rupee was first announced in the February 2022 Unions budget parliament by the government of India for the fiscal year 2022-2023 onwards. The budget also laid out broad goals to be achieved by implementing a CBDC using blockchain and other technologies such as a more efficient and cheaper currency management system.

India’s CBDC is expected to possess key features such as; cross-platform support that enables the development of various client applications using CBDC for Financial Services, the ability to integrate with other IT platforms in the digital space, highly scalable to perform a large volume of transactions and highly efficient to monitor and prevent fraud.

India’s Involvement in Blockchain Technology

The CBDC works just like any country’s fiat currency. It can be used as a means of payment for making financial transactions. 

India is very much interested in developing its CBDC for an enhanced digital experience. The growing adoption of non-government digital currencies has raised concerns with the RBI, which says such virtual assets could disrupt the financial ecosystem.

The central bank of India has set up a group to explore the possibilities of a rupee-backed digital currency. Since the advent of private digital tokens, CBDC issuance has sought to reduce the cost of creating paper and metallic money.

Maersk-IBM which is the largest shipping port operator in India announced its involvement in using blockchain technology in its business processes, to show a broad-based embrace of India to the underlying technology.

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Reserve Bank of India Advocates for Crypto Ban

The Reserve Bank of India (RBI) has advocated for a blanket ban to be imposed on the digital currency ecosystem as the central bank believes this nascent asset class poses a threat to the rise of the country as a global power.


While the underlying concern seems noble, the call from the RBI, which comes as a published critical bulletin, has sent the crypto world into a new frenzy, having nursed the possibilities of these currencies being regulated in the country.

India remains a crucial hub for the future of digital currencies, not just because of its population and market but also because great talents come from the country. In the Bulletin, the RBI acknowledged and commended the technology backing the cryptocurrencies. The understanding that their existence poses a threat to the financial sovereignty of India is enough ground for an outright ban.

“Historically, private currencies have resulted in instability and have evolved into fiat currencies over centuries. The retrograde step back to private currencies cannot be taken simply because technology allows it without considering the dislocation it causes to society’s legal, social and economic fabric.”

Indian authorities were making excellent headway in pushing for the regulation of the crypto ecosystem as consultations with important stakeholders is already underway. With a new tax proposal being introduced in recent times, Indian crypto investors already feel that the country is finally tilting as being a pro-crypto nation. The current insinuations from the RBI may serve as a setback to these advanced strides with respect to crypto engagement in India.

Talking about the situation of current investors, the RBI note says anyone whose money is tied in crypto will be given ample time to liquidate their holdings. However, the bank noted that the fact that these investors understand the risks in the space should make them ready to stomach any turn in events.

“Persons who have invested in these instruments are fully aware of the risks involved. Investors who have acquired these instruments have done so with their eyes wide open, at their own risk, and do not warrant any regulatory dispensation.”

The varying interest in the Indian crypto ecosystem has introduced an additional level of uncertainty to the country.

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India Should Ban Cryptocurrencies, Says RBI Deputy

India should ban cryptocurrencies as they are related to Ponzi schemes or worse and they pose a threat to financial and macroeconomic stability, a deputy governor at the Reserve Bank of India (RBI) said. - 2022-02-15T104727.611.jpg

“We have also seen that cryptocurrencies are not amenable to definition as a currency, asset or commodity; they have no underlying cash flows, they have no intrinsic value; that they are akin to Ponzi schemes, and maybe even be worse,” T. Rabi Sankar said in a speech.

Sankar’s comments have come after the Indian government established a taxation framework for cryptocurrencies.

On February 1, 2022, India decided to regulate cryptocurrencies by introducing a tax of 30% on income from transactions involving digital assets, Blockchain.News reported.

Blockchain.News also reported that India’s Finance Minister Nirmala Sitharaman came out guns blazing to clarify that cryptocurrency taxation is a “sovereign right” and “corrective action”.

Sitharaman clearly noted that while the “profit emanating from transactions associated to cryptocurrency has been taxed, nothing has been done, at the moment, to legalise, ban or de-legalise it”.

Sitharaman also clarified doubts about the future of cryptocurrency in the country, stating that if there were any final decisions on prohibiting digital currencies, it would only come after due consultation from all stakeholders.

It gave hope to crypto exchanges and investors who have been arguing for the regulation of cryptocurrencies as an asset.

However, Sankar has been a firm supporter of an outright instead of regulation.

“Cryptocurrencies are not currencies, financial assets, real assets, or even digital assets. Therefore, it cannot be regulated by any financial sector regulator. It is not possible to regulate something that one cannot define,” he said.

“All these factors lead to the conclusion that banning cryptocurrency is perhaps the most advisable choice open to India.”

Sankar said that cryptocurrencies have been developed to bypass the regulated financial system and that he does not accept the argument that cryptocurrencies must be permitted for blockchain technology to thrive.

Sankar also pointed to a Wall Street Journal report that stated that there had been $14 billion worth of illicit transactions, involving cryptocurrencies last year. 

According to industry estimates, there are about 15 million to 20 million cryptocurrency investors in India, with total holdings of about 400 billion Indian rupees ($5.3 billion).

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RBI Says India Will Initially Go for Basic Model For CBDC

As India struggles with how to regulate cryptocurrencies, the country’s central bank announced fresh plans to introduce a basic CBDC initially before implementing a more sophisticated version. - 2021-12-29T145213.143.jpg

On December 28, the Reserve Bank of India released a report called “Trend and Progress of Banking in India 2020-21″, and further elaborated on the regulator’s plan of a Central Bank Digital Currency.

The report states, “in its basic form, a central bank digital currency (CBDC), provides a safe, robust and convenient alternative to physical cash. In comparison with existing forms of money, it can offer benefits to users in terms of liquidity, scalability, acceptance, ease of transactions with anonymity and faster settlement.”

The central bank is considering how to implement a CBDC in phases and its initial recommendation focuses on “adopting basic models initially, and test comprehensively so that they have minimal impact on monetary policy and the banking system.”

Given the dynamic impact of a CBDC on macroeconomic policymaking, the report stated that “it is necessary for the CBDC to adopt a basic model initially, and test comprehensively so as it has minimal impact on monetary policy and the banking system.” The report further mentioned that the existing payment system architecture would be used to provide a useful backbone to make a state-of-the-art CBDC available to its citizens and financial institutions.

The report also raised questions about many aspects of CBDCs, including design elements that should be navigated before the central bank introduces a CBDC. The design elements include examining the rollout and navigating whether the national digital currency would serve a general purpose and be available for retail use or whether it would be for wholesale use.

The RBI’s deputy governor, T Rabi Shankar, said that the central bank is working to roll out two types of CBDCs (wholesale and retail) and further stated that the regulator has done a lot of work on the wholesale CBDC but the approval of the retail-based CBDC is more complicated and would take some more time. He stated that currently the wholesale CBDC is ready and would be released for pilot testing.   

India Favors Partial Ban on Crypto

Last month, India’s government was making preparations to ban private crypto coins and to allow the country’s central bank to launch an official digital currency. The proposed legislation follows a massive crypto crackdown in China where the central bank and financial regulators have made all cryptocurrency transactions illegal.

In the winter session of the parliament which started on November 29, India’s lawmakers discussed the proposed legislation titled “The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021”.

The bill however appeared to leave some room for crypto use. While the bill intends to prohibit all private crypto assets, it allows some exceptions to promote the underlying technology of cryptocurrency and its uses. On the first day of the winter session of the parliament, the government obtained several questions concerning the looming ban of crypto assets and the RBI’s plans to launch an official digital currency.

In August, RBI governor Shaktikanta Das revealed that pilot tests for the introduction of the official digital currency would likely start in December 2021.

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India Won’t Recognize BTC As Currency, Nor Does It Collect BTC Transaction Data

India continues its flirtation with Bitcoin and other cryptocurrencies. The Indian Parliament’s winter sessions started, and, as it turns out, BTC won’t be the star of the show. In fact, the lower house of the parliament asked the Finance Minister point blanc if there was a proposal to recognize Bitcoin as currency. The answer was a resounding “no.” 

According to AMB Crypto

“While more clarity is set to emerge in this context, some reports have claimed that the Indian administration is planning to make cryptocurrencies available as an asset. Additionally, others suggest cryptos will not be accepted as legal tender.

All of this information came in the form of a note. In that document, the Financial Minister also answered “whether the Government has allowed cryptocurrency exchanges as a legally permitted entity in India”:

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“Cryptocurrencies are unregulated in India. RBI has vide its circular dated May 31st, 2021, advised its regulated entities to continue to carry out customer due diligence processes in line with regulations governing standards for Know Your Customer (KYC), Anti-Money Laundering (AML).”

So, as you can read, it’s the same old script the other countries are using. If that’s the case, what’s the cause for all the confusion?

Mixed Signals Coming Out Of India

NewsBTC has been on this case. Just three weeks ago, while discussing the India exchange’s remarkable growth, we said optimistically:

Discussions around regulations started to arise back then. India’s crypto exchanges and investors participated in off-the-record meetings with law enforcement agencies and banks hoping to reach a point of amicability.

The expectations are for the government to classify bitcoin as an asset class and for the Securities and Exchange Board of India to regulate cryptocurrencies and bring clarity, closing the doors to another ban.”

However, just a week ago, we reported that the Reserve Bank of India “is set to launch its CBDC by December.” And what was that news seasoned with? A ban, of course:

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“A bill was recently presented, and sets to shake things up for many of big name coins in India. The ‘Cryptocurrency and Regulation of Official Digital Currency’ bill will create a facilitative framework for an official digital currency to be issued by the Reserve Bank of India, and that will look to ban all private cryptocurrencies, which includes Bitcoin and Ethereum.”

It was a fair conclusion, considering. In early 2018, the Reserve Bank of India banned the buying and selling of cryptocurrencies by entities under the RBI’s jurisdiction.

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What’s The Indian Parliament’s Current Position?

The headlines from the recent session with the Financial Minister are those two. There’s no proposal to recognize Bitcoin as currency and the government doesn’t collect Bitcoin transaction data. Fortunately for them, the blockchain is an immutable ledger. They don’t have to collect a thing, it’s all there.

In any case, AMBcrypto sees it as:

“A crucial piece of information, especially since some bodies associated with the ruling party had called for central regulation of crypto. For instance, Swadeshi Jagaran Manch’s (SJM) Co-convenor Ashwani Mahajan had suggested that crypto-data around mining and transactions be stored only on domestic servers.”

Reporting on the same session, Asian News International saw another angle. “This is a risky area & not in a complete regulatory framework. No decision was taken on banning its advertisements.”

In another stage, former Finance Secretary Subhash Garg cleared things up. He created the bill that seemed to aim to ban all cryptocurrencies in India. Cointelegraph reports:

“In an interview with local news channel News 18, Garg clarified:

“[The description of the crypto bill] was perhaps a mistake. It is misleading to say that private cryptocurrencies will be banned and to intimate the government about the same.”

So, by “private cryptocurrencies” he didn’t mean Bitcoin or Ethereum, which have public blockchains. Got it.

Still, India’s confusion about cryptocurrencies is the main topic here. They don’t seem to know what to do about those pesky coins over there.

Featured Image: Darshak12Pandya on Pixabay | Charts by TradingView


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Indian PM urges democratic countries to collaborate on cryptocurrencies

India appears to be taking a progressive stance on Bitcoin (BTC). Especially given the fact that the country is attempting to reach a uniform viewpoint on the categorization and legality of this new asset class.

Amid a slew of cabinet meetings, industry debriefings and mounting banking issues, the country’s prime minister has grown increasingly vocal about cryptocurrencies.

At the Sydney Dialogue, Prime Minister Narendra Modi called for democratic countries to work together to get the most out of cryptocurrencies and blockchain technology. He also stated that they should not be used for unethical purposes.

On Monday, PM Modi spoke about cryptocurrencies in the context of money laundering and terror financing at a high-level meeting. The overall atmosphere around the meeting suggested that strong regulatory measures were on the way, albeit of a forward-looking and progressive nature.

The Indian government has previously taken steps to establish a robust regulatory infrastructure for the fast-growing sector. It has had numerous high-level discussions, including one between the Central Bank (RBI), Finance Ministry, and Home Ministry, as well as crypto-experts and important industry participants from within and outside of India.

Despite the objective viewpoint offered by some government ministers, RBI Governor Shaktikanta Das is still unconvinced. On Tuesday, the executive restated his stance that allowing crypto trading might jeopardize any financial system since they are not overseen by central banks.

Related: India’s top payment firm Paytm reportedly considers Bitcoin services

Despite the rise in popularity of cryptocurrencies in India, lawmakers are still divided over the need for a comprehensive regulatory system. A Bitcoin bill is expected to be presented before the Indian legislature during the next session. Many people are hoping that this will provide investors and organizations some peace and clarity.

As reported by Cointelegraph, India plans to lower the Goods and Services Taxes (GST) on cryptocurrency exchanges from 18% to 1% through regulatory reclassification. Also, Peru’s central bank president recently stated that his country will join forces with India and two other nations to create its own central bank digital currency, even though crypto regulation is still hazy in India.