Digital currency adoption slows

- Testing the retail segment of digital currencies, is running at a slow pace. Due to this, the Reserve Bank of India's ambitious target of 10 lakh transactions by the end of this year is in jeopardy.

Sources with knowledge of the matter said that 35 lakh merchants and 10 lakh customers have been selected for the pilot test but only 10 to 12 thousand transactions are taking place per day. There is still a lack of awareness about this. This system is different from Unified Payment Interface (UPI). 13 banks are participating in the pilot project.

Although the number of traders and customers has increased but they are not transacting. The use of this system needs to be increased and awareness is very important for this.

A digital currency is a digital form of currency notes issued by a central bank. The Reserve Bank has broadly defined e-Rupee as a digital form of legal tender. It is similar to sovereign paper currency but has a different form. It is interchangeable with existing currencies and accepted as legal tender as a valid form of payment. It also preserves value.

One of the major initiatives of the Reserve Bank to popularize digital currencies is to enable instant transactions between digital currencies and UPI. Many banks have also started such services for their customers. However, consumers are not transacting in digital currencies and the main reason for this is lack of awareness.

The pilot trial, which began on December 1, 2022, was initially launched in four cities: Mumbai, New Delhi, Bengaluru and Bhubaneswar. Later its coverage was extended to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla.

Reserve Bank Deputy Governor T Ravishankar said the RBI has been able to test various technical architectures, design options and use cases during the pilot test. The digital form of currency brings with it many possibilities that can bring innovation and efficiency. Like existing systems, it facilitates offline, cross-border transactions and can create entirely new frameworks for managing the financial system. Just like UPI, this digital form of currency will also see many innovations in the coming days.

The inclusion of online aggregators and shopping applications (apps) in the CBDC ecosystem can help increase the popularity of digital rupees. However, there are still plans to add online apps but it will take six months or so. One of the main objectives of the Reserve Bank in promoting e-Rupee is to reduce transaction costs on cross-border payments. Reserve Bank Governor Shaktikanta Das raised the issue of high costs and slow speeds associated with cross-border transactions and said the instant-settlement facility of digital currencies could play an important role in addressing those issues.