Reserve Bank of India will launch the retail central bank-backed digital currency ([CBDC](/news/article/india-cbdc-launch) pilot next month. It will be interoperable with existing payment systems.

On [1 November](https://www.reuters.com/article/india-cenbank-digital-rupee-idUSKBN2RQ0WO), RBI debuted the wholesale segment pilot for the digital rupee. According to the RBI, the digital rupee will increase market efficiency by lowering settlement transaction costs.

The settlement of secondary market transactions involving government securities has been the primary use case of the Reserve Bank of India CBDC.

## Reserve Bank of India CBDC to debut

[According](https://economictimes.indiatimes.com/news/economy/policy/rbi-in-final-stages-of-retail-cbdc-pilot-rollout/articleshow/95598347.cms?from=mdr) to the Economic Times of India, the RBI is reportedly finalising plans to launch the retail digital rupee pilot. The participating [banks](/news/article/which-uk-banks-allow-cryptocurrency-purchases) are the State Bank of India, HDFC, Union Bank of India, Bank of Baroda, ICICI, Kotak Mahindra, Yes, and IDFC First Bank.

The report stated that the pilot would include all commercial banks currently operating in the country and that the National Payments Corporation of India would host the [CBDC](/news/article/cbdc-uk) platform. It will be similar to the instant real-time payment system formed by NPCI, the unified payments interface (UPI) system.

According to the report, the digital rupee is not intended to replace existing widely used payment systems, but to supplement them. The retail CBCD will be compatible with other payment systems and function similarly to UPI.

Each participating bank will test the CBDC on 10,000 to 50,000 users. The banks will work with the PayNearby and Bankit platforms to implement the new payment option, and the NPCI will be in charge of the CBDC infrastructure.

Customers and merchants will both need to download the CBDC-specific wallets. The retail CBDC of India will initially be offered as a stand-alone product, with the final version integrating with existing mobile and internet banking services.

Plans to launch the CBDC were revealed in February 2022 by Indian Finance Minister Nirmala Sitharaman, who claimed that a digital rupee would give India's economy a "big boost". The Reserve Bank of India then suggested a three-step graded rollout strategy, aiming for little or no disruption to the traditional economic system


Reserve Bank of India CBDC Pilot

The Reserve Bank of India is about to launch India CBDC, or Central Bank Digital Currency, aimed at specific use cases.

According to the Reserve Bank of India (RBI), "multiple technological options will be tested, and the final architecture will be decided based on the results." The Indian Central Bank recently published a report titled "[Concept Note on Central Bank Digital Currency](https://rbi.org.in/Scripts/PublicationReportDetails.aspx?UrlPage=&ID=1218)."

The RBI clarified that the concept note's goal is to raise awareness about CBDC and the characteristics of the digital rupee. It explains the objectives, options, benefits, and risks of CBDC in India.

It discusses technology and design choices, potential uses of the digital rupee, issuance mechanisms, and the effects of CBDC implementation on the banking system, monetary policy, financial stability, and privacy concerns.

## India CBDC

[CBDC](/news/article/cbdc-uk) will be a payment medium, legal tender, and safe store of value for all citizens, businesses, governments, and others who can convert cash into digital rupees. It aims to speed up transactions while lowering costs.

It will be consistent with RBI monetary policy and appear on the central bank's balance sheet as a liability. It is a fungible legal tender that does not require holders to have a bank account.

Digital currency will be introduced gradually, with appropriate phase-out strategies. This means that the launch will proceed through various stages of pilots, followed by a final launch.

In addition, there will be concurrent use cases that can be implemented with little to no disruption.

## RBI on CBDC

The Reserve Bank of India has also been analysing the idea of "implementing account-based CBDC in the wholesale segment and token-based in the retail segment via a graded approach." 

The RBI has also expressed concern about the recent rise in the popularity of cryptocurrency. It is concerned that the proliferation of crypto assets will pose significant risks in terms of money laundering and terrorism financing.

"The unabated use of crypto assets may pose a threat to monetary policy objectives because it may result in the creation of a parallel economy and will likely undermine monetary policy transmission and domestic currency stability," it said.

The RBI stated that developing the CBDC could provide the public with a risk-free digital currency that will provide them with lawful benefits without the risks associated with dealing in private virtual currencies. 






RBI to launch India CBDC

The continued worldwide adoption of crypto and blockchain took another giant leap forward today with the announcement of tax implications and the issuance of CBDC’s from the Indian Ministry of Finance.

As part of the national budget for the forthcoming year, Finance Minister Nirmala Sitharaman announced any income from the transfer of ‘virtual digital assets’ is to be subject to a 30% tax. Sitharaman went on to declare that a digital Rupee would most likely be released sometime between 2022 and 2023 providing a clear sign that India is one step ahead in its proposed release of a Central Bank Digital Currency (CBDC). 

## Largest crypto market in the world.

In a long and detailed speech lasting over two hours, Ms Sitharaman said “there has been a phenomenal increase in transaction in virtual digital assets. The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime.”  

India is believed to have one of the largest crypto markets in the world with as many as 15 million individual crypto investors. This figure has increased significantly in recent years despite the Royal Bank of India attempting to ban cryptocurrency trading in 2018 when it ordered banks not to facilitate crypto trade. More recently, in December 2021, the RBI was still pushing for a complete ban as it believed partial restrictions would not work. Therefore, although today’s announcement from the Ministry of Finance comes somewhat out of the blue it just goes to show the growth and strength of this nascent asset class is practically unstoppable.

## Indian CBDC less than a year away?

While many countries continue to explore the issuance of a CBDC few seem to have made as much progress as India. As you may imagine China lead the pack with South Korea, Canada, and the European Union all still deep in the developmental phase. 

In a press release from April 2021, The Bank of England announced plans of a ‘CBDC Taskforce’ to explore the possibility of creating its own CBDC, a statement in the following November however indicated that any plans to release ‘Britcoin’ to the general public may not come to fruition until 2025. India is well ahead in the development and release of its CBDC and while this may sound impressive it is worth remembering that every nation has a different economic framework with associated requirements. 

Speaking of CBDC’s specifically Sitharaman said that digital currencies would be “issued using blockchain and ‘other technologies’ by the RBI starting 2022-23. This will give a big boost to the economy." 

While there was no mention of crypto per se, the Minister preferred to use the term ‘Virtual Digital Asset.’ Additionally, many crypto proponents believe that ‘other technologies’ may be a nod towards third generation consensus protocols which technically don’t use a blockchain. With such a short timeline until launch India will be sure to experience a mass scramble for legitimate and up to date information, digital and hardware wallets and as can be expected the endless search for new opportunities for revenue. Watch this space.


India to Tax All Crypto Trade by 30%

Moves to outlaw private cryptocurrencies in India are being seen as a crypto investment opportunity by some.

Maybe it was just one of those overdue ‘gut check’ moments that newer markets sometimes need to experience on their course of evolution towards maturity. After enjoying a sensational run, cryptocurrencies in India were rocked this week by the news that the government will introduce a Bill in the Parliament that could ‘outlaw’ all _private_ cryptocurrencies.

## Jitters Among Crypto Investors

Granted, the government of the country with a population of 1.4 billion said it would make certain exceptions to ‘_promote_ the underlying technology of cryptocurrency and its uses’.

The news caused jitters among newer crypto investors.

September and October brought a lot of newcomers to the digital assets market and this kind of development has produced knee-jerk reactions from investors in the past. This is particularly the case with new (as in skittish) crypto investors who are likely to jump the crypto-ship at the first sign of danger.

Not only have digital coins like Ethereum and Bitcoin enjoyed a ride to new heights in value recently because of the recent influx of funds, but a new kind of digital asset, non-fungible tokens (NFTs), even found a home in the headlines for their skyrocketing values and enigmatic characteristics.

## Meme Coins Lose Value

A closer look at India, and the posted bulletin, reveals that the ban is a component of the proposed _Cryptocurrency and Regulation of Official Digital Currency Bill_ slated for introduction at the coming winter session. The legislation is purported to achieve the creation of ‘…a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India (RBI)’.

Yesterday morning, according to [Bloomberg](https://www.bloomberg.com/news/articles/2021-11-24/a-huge-arbitrage-opportunity-has-just-opened-up-in-crypto), the mega-popular coins Shiba Inu and Dogecoin had lost considerable value – more than 20% on the WazirX crypto exchange in India. The damage seemed to be relatively contained _to_ India as values of the same coins on popular exchanges remained largely unchanged.

What’s most compelling about news like the proposed ban is the opportunity it creates for arbitrage; activities where the savvy investors jump into action to pick up a few assets for a bargain price with the intention of profiting elsewhere, usually another exchange.

## WazirX Experiences Trading Delays

A [report from CoinDesk](https://www.coindesk.com/markets/2021/11/24/stablecoin-tether-crashes-on-indian-exchanges-traders-buy-the-dip/) sheds a bit of light on the phenomenon, but the shell game of buying and transferring funds to a different exchange after purchasing assets at a lower cost is much harder than it sounds.

Still, the attempts were being made and the WazirX had to send out a tweet that it was experiencing trading delays in their app after exchange users were voicing frustration that they could not move their crypto. Arbitrage opportunities in the crypto-market have long been one of the primary targets of regulatory efforts.

The good news is that 2021 will go down as a big year for cryptocurrency. It was the year that key players on Wall Street built up enough confidence to make substantial investments in the digital assets and mainstream adoption now seems achievable. Whether India’s proposed ban will have any long-term consequences is yet to be determined.

Is India ‘Ban’ Bill a Crypto Investment Opportunity?

Regulation of crypto is a major talking point right now, but Indian Prime Minister Narendra Modi’s comments on the subject have left some baffled.

Addressing the Sydney Dialogue, Modi made comments on [Bitcoin (BTC)](/coins/btc) and crypto regulation.

He said: ‘Democratic nations should work together on cryptocurrency to ensure it does not end up in the wrong hands.’

## Modi's Words on Twitter

Although it is unclear what the ‘wrong hands’ are, Modi’s words were considered important enough to be repeated on his [official Twitter feed](https://twitter.com/narendramodi).

His account tweeted: ‘Take cryptocurrency or Bitcoin for example. It is important that all democratic nations work together on this and ensure it does not end up in \[the\] wrong hands, which can spoil our youth.’

Also during the address Modi said: ‘We are at a historic moment of choice. Either all the wonderful powers of technology of our age will be instruments of cooperation or conflict, coercion or choice, domination or development.’

## Social Media Speculation

The comments sparked social media speculation that India may be on the verge of a China-style crackdown. Many, however, felt the comments meant little more than Modi supports responsible crypto regulation.

There is interest in India’s crypto stance, as the country is reported to be considering its own central bank digital currency (CBDC) project. This could arrive next year, although progress by the central Reserve Bank of India (RBI) has been considered slow.

A media report in India this week said the RBI is still examining ‘matching domestic priorities with design features’.

While limited trials of the proposed CBDC are pencilled for next month, a national rollout looks unlikely any time soon.

Despite the way some have interpreted Modi’s comments, India is thought unlikely to want to restrict crypto access in the way China has.

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