India’s Central Bank Starts Pilot Digital Currency Program

  • Banks trade 2.75 billion rupees of bonds using RBI’s e-Rupee
  • Five-year and 10-year bonds are traded on the first day

On Tuesday, the Indian central bank launched a trial program for its virtual currency, allowing a restricted group of banks to settle secondary-market trades in government securities.

Data from Clearing Corp. of India Ltd. showed that banks traded bonds worth 2.75 billion rupees ($33.3 million) on the first day the new form of currency was used. The 7.38% 2027 bond had 24 trades worth 1.4 billion rupees, the 7.26% 2032 issue saw 23 deals totaling 1.3 billion rupees, and the 6.54% 2032 bond saw one trade. All nine participating institutions participated in these transactions.

The Reserve Bank of India announced on Monday that the e-rupee will be tested for retail use in a few areas within a month. India is stepping up its opposition to private digital currencies as the launch occurs. This year, officials unveiled a new tax structure that drastically reduced volumes on cryptocurrency exchanges.

A day after Singapore’s monetary authority announced testing of a digital version of its local dollar, the restricted roll-out was announced. In this area, experiments have been conducted by the central banks of China, the eurozone, the Bahamas, and other countries. Many other people are looking into measures to stop the harm that private digital currencies pose to financial stability.

The RBI had stated in a concept note that central bank digital currencies “would provide the users the identical experience of trading in currency in digital form, without any dangers associated with private cryptocurrencies.” Additionally, “by avoiding the detrimental social and economic implications of private virtual currencies,” these currencies will offer consumer protection.

The State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank Ltd., Kotak Mahindra Bank, Yes Bank, IDFC First Bank, and the Indian division of HSBC Holdings Plc are among the banks taking part in the trial.

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