Central Bank Digital Currency (CBDC), a digital currency issued by central banks, is becoming increasingly popular worldwide. India is also not lagging behind and is introducing its own version of CBDC, known as CBDC-R (Central Bank Digital Currency – Retail). Shortly after its launch, it achieved an impressive level of transactions, but is it still maintaining the same level? What are the future plans and benefits of this innovation? You will learn all about it in this article.
Recently, the Reserve Bank of India announced that in December 2023, the level of CBDC-R transactions reached 10 lakh per day. This was a true breakthrough in the field of modern financial technology. However, since then, transaction volumes have somewhat stabilized and are staying below this impressive level. What exactly happened after achieving this record result?
Scalability and processing issues:
As it turned out, after achieving a record number of CBDC-R transactions, unexpected scalability issues and processing capabilities arose. Banks were forced to seek solutions that would allow them to meet growing demands and maintain operational liquidity. However, in recent weeks, these issues have been resolved, and transaction volumes are slowly starting to increase.
Transaction value: “Several crores”:
Considering the scale and popularity of CBDC-R, one cannot forget about the value of transactions, which is as significant as the transaction count itself. According to information from the Reserve Bank of India, the value of CBDC-R transactions is in the “several crores” range. This is an incredibly high amount, which only confirms that the central bank’s digital currency already has its place in the Indian financial system.
Reserve Bank of India to publish data:
To provide accurate information about the achievements and current status of CBDC-R, the Reserve Bank of India plans to soon publish periodic data on transaction volumes, transaction values, and other relevant metrics. This will be an important step in building trust in this innovative financial technology. It is expected that this data will be regularly updated and made available to the public.
Wholesale CBDC: Testing new use cases:
Not only CBDC-R is attracting interest among users, but another version of central bank-issued digital currency – wholesale CBDC. In the case of this currency, the Reserve Bank of India is focusing not only on transaction volumes but also on testing new use cases. Imagine government securities and the money market being implemented using this modern financial technology.
Asset tokenization as the next step:
Tokenization, the transformation of traditional financial assets into digital tokens, is the next step that the Reserve Bank of India plans to take in the realm of wholesale CBDC. Tokenization will allow for more efficient and transparent movement of government bonds and other assets. This is a great solution for those who want to invest in government securities but do not have access to traditional financial markets.
Cross-border transactions as the ultimate benefit:
Although the Reserve Bank of India is currently focusing on testing wholesale CBDC technology, its ultimate goal is to enable cross-border transactions. CBDC transactions on a global scale can bring many benefits, including savings related to settlement risk and easier movement of capital between countries. However, before this becomes a reality, the Reserve Bank of India needs to continue testing and refining the technology.
Cross-border transactions still under negotiation:
Currently, cross-border discussions are ongoing, with some countries expressing interest in cross-border transactions using CBDC. This is an important step towards global engagement and cooperation in the field of central bank digital currency. However, many details still need to be determined, and the technology needs to be thoroughly tested and validated. The Reserve Bank of India will certainly make every effort to succeed in this field.
CBDC-R and wholesale CBDC are two innovative concepts that the Reserve Bank of India has successfully introduced to the market. After achieving a record level of transactions, issues related to processing and scalability have been resolved, and the technology continues to evolve. The value of CBDC-R transactions is impressive, and data on transaction volumes will soon be published by the bank. The ultimate benefits of CBDC-R will come from cross-border transactions, which are still under negotiation. Wholesale CBDC is being tested for new use cases, such as asset tokenization, opening up new investment and financial opportunities. India is also ready to engage in cross-border discussions on CBDC transactions, aligning itself with global efforts in the field of central bank digital currency.