India's Digital Rupee 'Retail' Pilot Program Launched: What's Different From Cryptocurrency?

India's Digital Rupee 'Retail' Pilot Program Launched

India recently conducted trials for its "Digital Rupee", but it was limited to some banking and financial institutions. The Indian government is now gradually introducing the Digital Rupee, also known as the e₹, in everyday financial transactions for the general citizenry. Let's see if India's virtual currency differs from the many prevalent cryptocurrencies and if it could help Indian citizens.


India Commences Trials For Digital Rupee "Retail" Version

Last month, India launched a pilot program for its Central Bank Digital Currency (CBDC). Also called e₹-W, some of the major Indian banks started transacting using the purely digital form of fiat or reserve-backed Indian currency. The trials were for the "Digital Rupee - Wholesale" segment. Now the Reserve Bank of India (RBI) has started trials for the "Digital Rupee - Retail" segment, also known as e₹-R.

The e₹-R is meant for retail users in India. The pilot project includes some select locations and banks in a Closed User Group (CUG). In other words, a small group of banks, merchants, and customers are currently part of the e₹-R trials.

Four banks that are participating in the trials of the Digital Rupee include the State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank. The tests are being conducted in the four cities of Mumbai, New Delhi, Bengaluru, and Bhubaneswar. The number of participating banks, and cities included in the trials, should gradually increase.

What Is The Digital Rupee or e₹-R?

The Digital Rupee is essentially an electronic version of India's fiat currency. The currency will be identical in value and can be traded for commodities just like physical cash. However, the e₹-R is not similar to the way UPI or online transactions exchange money for goods.

India's Digital Rupee will eventually be available for use in the private sector, and non-financial consumers, and businesses, could exchange the same, mentioned the RBI:


"CBDC is the legal tender issued by a central bank in a digital form. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. Only its form is different."

The e₹-R will be available through a digital wallet. Retail users will have to acquire a virtual wallet from the participating banks. As with any digital wallet, the e₹-R wallet will also be stored on mobile phones and devices, confirmed by the RBI. These wallets, however, will not earn any interest if the Digital Rupee is stored for prolonged periods of time.

Is India's Digital Rupee Another Cryptocurrency?

The e₹-R is essentially a digital token that represents the prevalent legal currency of India. In other words, it will have the exact same value or denomination as India's paper currency. India is currently testing the e₹-R and the e₹-W or the Retail and Wholesale versions of the Digital Rupee respectively.

A fully digital tokenized currency seems similar to the dozens of cryptocurrencies that are floating on the internet. However, India's e₹ is fully backed by the RBI, the country's apex banking body. And the primary intention behind launching the Digital Rupee is to reduce costs and improve efficiency.

Handling physical cash is time-consuming and involves some risks. Online banking and instant payment mechanisms such as UPI, IMPS, and NEFT can reduce the burden. However, reconciliation and account management are tedious tasks for banks. India's Digital Rupee could help address these issues. RBI had previously hinted the e₹ may also help in fighting money laundering, terror financing, and tax evasion.

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