India's central bank, the Reserve Bank of India (RBI), announced on Monday that "The first pilot, digital rupee in the wholesale market will begin testing starting today, November 1, 2022.
In the announcement it was stated that nine banks have taken the place namely 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.
"The use case for this pilot is to include the settlement of secondary market transactions in government securities," RBI explained. “The use of e₹-W is expected to make the interbank market more efficient. This digital currency settlement is at the same time predicted to reduce transaction costs by preempting the need for settlement guarantee infrastructure or collateral to reduce settlement risk”.
The RBI stated that future tests will focus on other wholesale transactions and cross-border payments. They will take into account the findings from this first pilot trial.
The first pilot in the digital rupee will be piloted in the retail market and is planned to be launched within a month in selected locations in a closed user group consisting of customers and merchants.
Earlier this month, India's central bank published a report detailing various aspects and risks of its central bank digital currency (CBDC).
According to the Atlantic Council's Geoeconomic Center, there are 105 countries, representing over 95% of global GDP, currently exploring CBDC. The Bank of International Settlements (BIS) also released a report in May showing that nine out of 10 central banks around the world are exploring CBDCs. The BIS said: “The emergence of stablecoins and other cryptocurrencies has accelerated the pace of work on CBDCs.”
Meanwhile, the U.S. has not decided whether to issue a central bank digital currency. Federal Reserve Chairman Jerome Powell recently said that the digital dollar will take at least a few years. Some lawmakers are not convinced about the need for a digital dollar, including Fed Governor Christopher Waller who said last week that he is not a big fan of the Fed issuing a central bank digital currency (CBDC).
