The Reserve Bank of India (RBI) will commence its pilot for the retail segment of the digital rupee (e₹-R) on December 01, 2022, according to this press release. The central bank had earlier commenced its pilot for the wholesale segment on November 1, 2022. The announcement revealed that eight banks had been identified for phase-wise participation in the pilot. The first phase will begin in Mumbai, New Delhi, Bengaluru, and Bhubaneshwar on 1 December. What is a digital rupee: It is a central bank digital currency (CBDC), or a digital token like cryptocurrency, issued by the RBI which is pegged to the value of fiat money (Indian rupee). Why it matters: The announcement is notable because the retail segment of the CBDC is expected to impact ordinary Indians unlike the wholesale segment which was restricted to banks and business. The pilot’s success can end up offering the central bank a viable alternative to counter the dizzying rise of private cryptocurrencies. The RBI is no fan of cryptocurrencies and it has made that clear on several occassions in the past. The pilot’s commencement is an encouraging sign but it is likely that the RBI is still months away from rolling it out for the public at large. What do we know about the pilot: The pilot will involve closed user groups comprising participating customers and merchants. The RBI clarified that the digital token (e₹-R) will represent legal tender and will be issued in the same denominations as fiat currency at present.…
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