In what is an ambitious e-rupee payments goal, the Reserve Bank is seeking to drive daily CBDC transactions to 10 lakh from up to 10,000 by the year-end, ToI reported on July 12. This the central bank intends to do by using UPI QR codes.
The RBI had launched the e-rupee for retail transactions on a pilot basis on December 1, 2022. As of June, about 13 lakh users have downloaded the CBDC wallet and around 3 lakh merchants are accepting CBDC payments.
The RBI has tasked banks with promoting the CBDC by making UPI QR codes interoperable for e-rupee payments. E-rupee payments carry a twin boon — the anonymity of cash as well as the convenience of digital transactions.
Transactions have not yet picked up primarily because of the limited number of merchants accepting CBDC.
Interoperability would enable any merchant accepting UPI payments to also accept CBDC, RBI deputy governor T Rabi Sankar said. This will eliminate worries about the number of merchants onboarded, he said at an Indian Banks’ Association conference.
As per data, 13 banks allowed to deal with CBDC had achieved partial interoperability, where QR codes can be scanned and linked to CBDC wallets if available.
The 10 lakh CBDC payments target was not too high considering that UPI transactions stand at 31 crore, Sankar said. At the same time, he added that it was large enough to get an idea of the implications.
As CBDC does not compete with existing systems like UPI, there won’t be any incentives available for CBDC transactions, he said. “Any payment system’s survival depends on the value proposition it offers users,” he added.
The deputy governor also listed removing friction in cross-border transactions and programming the currency for specific purposes as two use cases for digital currency. He added that there was a need for a domestic digital currency to counter the stablecoin threat.
It may be noted here that stablecoins are cryptocurrencies pegged to the value of fiat currencies.
Many institutions, including the Bank for International Settlements (BIS), are exploring CBDCs to address cost and time inefficiencies in cross-border transactions, Sankar said.