India's central bank will introduce a pilot wholesale central bank digital currency (CBDC) Nov. 1, and a retail version will start within a month. In a statement, the Reserve Bank of India (RBI) said the use case for the wholesale digital rupee is the "settlement of secondary market transactions in government securities" because it would reduce transaction costs.
Nine prominent banks have been identified for participation in the pilot. These are State Bank of India (SBIN), Bank of Baroda (BANKBARODA), Union Bank of India (UNIONBANK), HDFC Bank (HDFCBANK), ICICI Bank (ICICIBANK), Kotak Mahindra Bank (KOTAKBANK), Yes Bank (YESBANK), IDFC First Bank (IDFCFIRSTB) and HSBC (HSBA).
The RBI said a pilot of the retail version is planned for launch within a month in select locations in closed user groups comprising customers and merchants. The bank published a 50-page concept note for the introduction of a central bank digital currency earlier this month.
Since early 2021 it's been known that 80% of central banks around the world are exploring CBDCs. Recently, Australia's Central Bank started a CBDC research project and announced plans to complete the pilot by mid-2023. The central banks of Israel, Norway and Sweden have teamed up to explore retail CBDC.
The Bank of International Settlements has also conducted a project with the central banks of Hong Kong, China, the United Arab Emirates and Thailand to study CBDCs and their possible role in cross-border payments and multi-CBDC transactions. The six-week pilot project successfully had 20 different commercial banks conduct over 160 payments worth around a total of $22 million.
India will have a prominent role in framing global crypto regulation when it takes over the G-20 group presidency for one year, starting from Dec. 1, 2022, until Nov. 30, 2023. The nation's finance minister, Nirmala Sitharaman, has said crypto will be part of the agenda.
Sitharaman has said that she seeks to arrive at a framework or a standard operating procedure after discussions with G-20 members and institutions based on their studies and research around the topic. "We would definitely want to collate all this and do a bit of study and then bring it on to the table of the G-20 so that members can discuss it and hopefully arrive at a framework or SOP (standard operating procedure) so that globally, countries can have a technology-driven regulatory framework," she said.
In January 2022, Indian Prime Minister Narendra Modi sought global cooperation to tackle the challenges posed by cryptocurrencies. Later in July, the Finance Minister said no legislation is possible without significant international collaboration while re-stating the RBI's known stance to parliament – ban cryptocurrencies to avoid a destabilising effect on monetary and fiscal stability.
UPDATE (Oct. 31, 13:12 UTC): Adds context throughout.
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