India is set to launch the full-scale version of its wholesale central bank digital currency (CBDC) despite the lukewarm response of institutions towards adoption. The targeted rollout is in the early part of January next year.
Soft Launch of India’s wCBDC
The Reserve Bank of India (RBI) introduced the pilot form of its wholesale CBDC (wCBDC) on November 1, 2022. The financial instrument was primarily aimed to cater to the settlement of secondary market transactions in government securities.
The first phase of the wholesale CBDC will initially target micro, small and medium enterprises (MSMEs) to guarantee gradual but smooth application of the program. According to the correspondence of Financial Express with an unnamed senior bank official of RBI, the wCBDC is not very different from its retail counterpart.
However, the spokesperson cleared out that they have to be more careful with the former since it involves large transactions, which entails foolproof accounting, auditing, and settlement reporting systems, among other security protocols.
RBI revealed the following lenders as its partners for the development of the wholesale CBDC:
- SBI
- Union Bank of India
- Bank of Baroda
- HDFC Bank
- ICICI Bank
- Yes Bank
- Kotak Mahindra Bank
Challenges to the Implementation of RBI’s wCBDC
Critics raised some concerns regarding the adoption of wholesale CBDC in dispute settlement. One issue pushed forth is that Indian corporations are already using Real Time Gross Settlement (RTGS) system. Not only has the platform proven itself as efficient, but it has also shown reliability. Another unnamed source said that this can be addressed via an information drive emphasizing the advantages of the wCBDC.
Additionally, CoinGeek noted the waning interest of participants in the digital rupee. Last year, RBI presented its pilot for government bond transactions, but enthusiasm for it faded just two months after.
RBI attempted to generate renewed interest in its wCBDC project last month by exploring its operability in the call money market. The experiments for it are expected to start before the end of 2022.
Retail CBDC Interest Gaining Traction
Unlike its wholesale variant, the retail CBDC announced by India’s central bank in late 2022 is enjoying wider institutional adoption. Just three months after its rollout, it immediately attracted 50,000 users.
Recently, three Indian commercial banks launched their own initiatives to support the digital rupee by incentivizing their use. Redeemable reward points are awarded for every retail CBDC transaction entered into by clients.
RBI expects its retail CBDC to rack up 1 million daily transactions before year end with daily transaction volumes reaching approximately 25,000.
Final Thoughts
India currently ranks first in the 2023 Global Crypto Adoption Index of Chainalysis. It tops the list in terms of centralized service value received, retail centralized value received, DeFi value received, and retail DeFi value received.
The trend can be attributed to its status as a Lower Middle Income (LMI) country based on the description used by the World Bank to categorize countries by wealth level in accordance with their gross national Income (GNI) per capita.
The country’s foray into CBDCs further propels its status as a hotbed for blockchain innovation and adoption of emerging technologies.
