Indian Central Bank publishes plans for Digital Rupee – says blockchain only suitable for smaller jurisdictions

The Reserve Bank of India (RBI) published a paper on Friday entitled “Concept Note on Digital Currencies” in which it set out its plans for the implementation of a digital rupee, or central bank digital currency (CBDC). The RBI concept note considers both retail and wholesale CBDCs.

The paper notes that one of the motivations for the introduction of CBDCs is to “meet the need for digital currencies, manifested in the increasing use of private virtual currencies”. It also stated that CBDCs have some clear advantages over other digital payment systems, including the potential for “more real-time, cost-effective seamless integration of cross border payment systems”.

Will India’s CBDC be built on blockchain technology?

Interestingly, the RBI says that it believes a CBDC built entirely on DLT or blockchain technology would not be suitable for India, due to the “probable low volume of data throughput” – in other words, the RBI does not think that DLT could meet the transaction volume needed for the Indian economy. It goes on to say that DLT, at this point in time, is really only suitable for building smaller jurisdictions’ CBDCs.

The RBI does acknowledge that DLT could be used alongside conventional tech:

DLT could be considered for the indirect or hybrid CBDC architecture. Further, it may also be possible that some layers of the CBDC tech stack can be on centralized system and remaining on distributed networks.

Reserve Bank of India, Concept Note on Digital Currencies October 2022

The proliferation of CBDC

At the time of writing, according to available data, just over 90% of central banks are actively investigating implementing a CBDC. Eleven countries have already launched CBDCs, including Nigeria, which launched the eNaira last October. The eNaira runs on DLT technology. China has been working on its digital Yuan since 2014 and rolled out a pilot phase of the CBDC in February of this year.

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Learn more about central bank digital currencies (CBDC):

• BIS Survey: Two-Thirds of Central Banks may issue retail CBDC within six years
• Public concern about CBDCs and surveillance is “misplaced” according to OMFIF
• BIS test R3 and Partior Prototypes in mCBDC Bridge Project
• Jamaica Hails CBDC Pilot a “Success”Visa Publishes Whitepaper Proposing “Bridge” between Stablecoins and CBDCs
• Bank of England and MIT Partner on Digital Pound Research