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India to roll out digital rupee payments pilot ‘within a month’

Prime Minister Narendra Modi gestures as he addresses a gathering after inaugurating a revamped colonial avenue in New Delhi, India, September 8, 2022. REUTERS/Adnan Abidi
Indian prime minister Narendra Modi: the new digital rupee is expected to give the Indian economy a big boost. Photo: Adnan Abidi/Reuters.

India's digital rupee pilot payment scheme will begin within a month, the nation's central bank has stated.

On Tuesday, a digital rupee pilot was started for the wholesale segment of the scheme, which will be followed by a fully retail CBDC payment pilot within a month, according to and Reserve Bank of India (RBI) announcement.

In a statement, the RBI said a wholesale digital rupee will allow for the "settlement of secondary market transactions in government securities".

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The commencement of India's central bank digital currency (CBDC) scheme has been hailed by the nation's monetary authority as a way to reduce transaction costs for both retail and wholesale interbank usage.

According to the RBI, the nine banks included in the wholesale segment are; State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank (IBN), Kotak Mahindra Bank, Yes Bank (YESBANK.NS), IDFC First Bank (FRBA), and HSBC (HSBA.L).

According to India's finance minister Nirmala Sitharaman, a digital rupee would be a “big boost” for India’s economy.

In a speech from February of this year, Sitharaman announced the launch of an Indian central bank digital currency, dubbed the digital rupee, by 2022–23, and added that it would be a means to boost the country’s economic growth.

The Indian government's enthusiasm for a CBDC is matched by its distrust of private cryptocurrencies and stablecoins.

While encouraging the development of the nation's CBDC’s, the Indian government has also been initiating legislation to make crypto less attractive for local investors.

Central bank digital currencies by design have attributes that are the opposite of cryptocurrencies such as bitcoin (BTC-USD).

CBDCs are centrally controlled by a nation's central bank, they also do not have to be deployed on a blockchain.

However, they borrow some elements from the crypto sector, such as the ability to be programmed for autonomous activation of payments, through 'smart contracts'.

In April, India imposed a 30% tax on cryptocurrency holdings and transfers and the nation's tax authorities are beginning to solidify their scrutiny of the burgeoning sector.

On Tuesday, India’s Central Board of Indirect Taxes and Customs (CBIC) asked major Indian crypto exchanges to provide details about the cryptocurrencies traded on their platforms.

According to the Business Standard, a senior CBIC official was quoted as saying: "We had meetings with crypto exchanges on wide-ranging issues relating to the asset class.

"We have sought a detailed report on different crypto products being traded and their respective transaction fees and how they are getting calculated."

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