RBI’s digital rupee needn’t languish: Here’s how it can succeed
₹234 crore at the end of 2023-24. Transactions only picked up after RBI introduced interoperability with the UPI system. But still, the volume of e-rupee transactions remains significantly lower than UPI, debit and credit card transactions in the country, which stood at ₹149.5 trillion in 2022.
The principal reason for the digital rupee’s slow uptake is the evident public satisfaction with our extant online payment system, UPI, which is performing well. The retail CBDC has failed to provide any significant value addition that could motivate retail users to switch over from the UPI ecosystem, to which most users are habituated. A similar trend can be seen across the globe for CBDCs.
In 2020, the Sand Dollar was introduced by the Bahamas as the world’s first fully-functional CBDC. However, its adoption rate has remained low, with circulation only reaching 0.19% of the total currency by September 2023. The reasons for this include the low priority given to helping people adapt to it and a general lack of trust in public institutions, apart from privacy concerns and scepticism over the reliability and authenticity of the Sand Dollar.
In China, similar problems arose as in India. China’s CBDC, e-CNY, has only seen limited adoption. Users were unwilling to switch from existing online payment solutions that are offered by private platforms such as Alipay and WeChat, which enjoy user habituation.
The digital yuan achieved 1.8 trillion yuan (or $249.3 billion) worth of transactions in 2023, but only accounted for 0.16% of China’s total money supply. What little momentum China’s e-CNY gained was largely due to Beijing’s promotions, which included lottery wins and ‘red packages’ as new year’s gifts for users. Way forward: The
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