What an e-rupee really is must be crystal clear
RBI’s concept note on its CBDC is out and a digital rupee is ready for trial runs. For success, a few aspects of its design must be sharpened. We need a well-aimed launch, not a hasty one
The Reserve Bank of India (RBI) could have avoided a mention of ‘barter’ in its brief history of money that opens its ‘Concept Note on Central Bank Digital Currency’ for being just another dubious story of origin, but does a fine job overall of posing cash as an abstract thing whose form—physical or digital—makes no difference to its purpose as a medium of exchange, unit of account or store of value: It is simply an IOU, a liability of the issuer. Hence, just as a banknote holds RBI’s promise to pay (a safe asset in our hands), so would a digital rupee issued as legal tender. Such a CBDC could also reduce currency cost, lower settlement risk, raise systemic efficiency and enable innovation in spheres like global transfers and programmable money. Released on Friday, RBI’s concept note proclaims it ready for e-rupee trials as part of a strategic implementation plan geared for minimal disruption. Indeed, it’s an evolutionary marker. Prudence demands caution not just on its monetary effects, but also its design, popular clarity on which will also be crucial to success.