Chiliz (chz) 
The Reserve Bank of India (RBI) is preparing to enhance the functionality of the digital rupee, aiming to test its application in cross-border payments in collaboration with international partners. This move signals potential steps toward the global adoption of India’s Central Bank Digital Currency (CBDC).
Development Plans for the Digital Rupee
India’s central bank has announced plans to introduce new features and use cases for the digital rupee in its latest Annual Report for 2024-25. These updates will leverage insights gained from earlier pilot programs, which included both wholesale and retail implementations launched in late 2022. The RBI’s efforts focus on expanding the scope of the digital rupee, particularly for cross-border payments on bilateral and multilateral bases.
Growth in Circulation
Data from the report highlights significant growth in the adoption of the digital rupee. The currency’s circulation increased by 334% year-on-year, growing from ₹234.04 crore (approximately $28.1 million) in FY24 to ₹1,016.46 crore (about $122.1 million) in FY25. This surge reflects the growing interest and potential utility of the e-rupee.
Challenges in Adoption
Despite this growth, the adoption of the digital rupee among retail users has been slower than anticipated. By June 2024, the RBI reported around 1 million retail transactions, a milestone reached only after local banks introduced incentives, including partial payment of employee salaries using the digital currency. However, achieving broader usage has proven challenging.
Earlier, the RBI encouraged banks to scale transactions to at least 1 million per day by late 2023 to test the system’s scalability. However, this goal has not been sustained, raising questions about the initiative’s long-term viability amidst gaps between incentivized adoption and organic user engagement.
Potential for Cross-Border Payments
The RBI’s exploration of cross-border payment functionalities for the digital rupee could open new avenues for international trade and financial transactions. Leveraging CBDCs for cross-border payments may reduce transaction costs, improve efficiency, and foster economic collaboration between nations.
Key Benefits of Cross-Border CBDC Adoption
- Lower Transaction Costs: Digital currencies can streamline payment processes, eliminating intermediaries and reducing fees.
- Faster Settlements: Real-time transactions can enhance the speed of cross-border payments compared to traditional banking systems.
- Enhanced Transparency: Blockchain-based CBDCs offer improved traceability and accountability in financial transactions.
While specific details of the new use cases remain undisclosed, the RBI’s commitment to advancing CBDC technology underscores its ambition to position India as a leader in digital currency innovation.
The Future of Digital Currency in India
The RBI’s focus on developing the digital rupee for domestic and international use highlights its broader strategy to modernize India’s financial ecosystem. However, addressing adoption challenges and ensuring scalability will be critical to achieving widespread acceptance.
As the global financial landscape evolves, CBDCs like the digital rupee have the potential to reshape payment systems, offering secure and efficient alternatives to traditional fiat currencies. India’s efforts to integrate these technologies into cross-border payment systems may pave the way for future advancements in global financial infrastructure.
