RBI to Enhance Digital Rupee Adoption with Offline Capabilities in Remote Areas
Summary:
India's central bank, RBI, is planning to introduce offline functionalities for its central bank digital currency (CBDC), the digital rupee, to expand its use in remote areas with limited internet connectivity. The features will be gradually implemented through pilot programs. Currently, the CBDC system enables person-to-person and person-to-merchant transactions through digital rupee wallets. The offline capabilities were first proposed back in March 2023 to test CBDC’s potential for cross-border transactions and legacy system integration. The RBI aims for the digital rupee to increase financial monitoring and phase out cash use.
Shaktikanta Das, Governor of the Reserve Bank of India (RBI), has stated that the RBI is set to investigate various offline methods to enhance the use of its central bank digital currency (CBDC), the digital rupee, particularly in areas with limited internet access. According to PTI, a government media outlet, these proposed offline solutions, which include proximity and non-proximity-based schemes, will be trialled in various settings such as hilly, rural, and urban areas.
During the Monetary Policy Committee review on February 8, the RBI governor confirmed that the central bank intends to bring in offline capabilities into the CDBC-R system to facilitate transactions in locations with low internet connectivity. He mentioned that these functionalities will be rolled out gradually through pilot programs.
As for the programmability aspect, Das said the CBDC system currently allows person-to-person (P2P) and person-to-merchant (P2M) exchanges through digital rupee wallets supplied by participating banks.
The idea of incorporating offline features was initially suggested in March 2023 by Ajay Kumar Choudhary, the RBI’s executive director. He mentioned that RBI is keen on examining the CBDC’s potential for transnational transactions and integration with existing systems abroad.
Interestingly, while the digital rupee is being experimented with offline functionalities, other existing payment systems, including the widely used Unified Payments Interface (UPI), have already embraced offline possibilities. Siddharth Sogani, CEO of Indian blockchain analytics firm Crebaco, has stated to Cointelegraph that the main objective of CBDCs is to enhance financial supervision and aim to eliminate the use of cash:
"Existing popular payment services are already offering offline capabilities, particularly UPI. However, the CBDCs resonate with the government's plan to phase out cash. While CBDCs do offer an alternate route, their key aim is to maintain a well-supervised financial system."
The RBI began a retail CBDC pilot in December 2022, hitting their goal of a million transactions daily in December 2023.
Published At
2/8/2024 12:10:55 PM
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