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(Kitco News) - While previous reports indicated that the Reserve Bank of India (RBI) was looking to onboard 500,000 users to its ongoing retail central bank digital currency (rCBDC) trial, several sources have said that the central bank is actually looking to double that number to one million users.
According to a report from CoinDesk, the architects of the rCBDC pilot are looking to scale the user base for the digital rupee higher than previously stated and have also prioritized the creation of an offline version, which has thus far proven to be a significant challenge.
“Given India’s population as the world’s largest, we expect to reach the milestone of one million users easily,” one source said, adding the tentative timeline for reaching one million users is three months.
The RBI has been working on CBDCs for several years and officially launched its wholesale CBDC (wCBDC) pilot in November, followed by the launch of the rCBDC pilot in December.
The rCBDC pilot is currently ongoing in 15 cities with more than 100,000 customers and 10,000 merchants participating in the trial. A total of 13 banks are helping to facilitate the test. If the pilot goes smoothly, the RBI is looking to have the full-scale launch of its rCBDC by the end of 2023.
In March, the RBI hosted its second ‘HARBINGER’ hackathon, which had the theme of ‘Inclusive Digital Financial Services’. The hackathon focused on four primary areas of concern: “financial services for differently abled, offline central bank digital currencies, RegTech solutions, and scalability of blockchains.” The RBI is also concerned about the risk of double spending.
The focus for CBDCs was on improving scalability, increasing transactions per second, and developing solutions for offline transactions. “This is nearly an impossible trinity,” one source said. “You can achieve two objectives but not the third. Hopefully, some technological innovation will address this soon.”
Indeed, the blockchain trilemma has been an issue for blockchain developers since Bitcoin was first released; and currently, there are no notable solutions to the problem. Offline payments are also a major concern when it comes to CBDCs and stablecoins, as highlighted by the list of approved pilot studies by the Reserve Bank of Australia, which includes a pilot for offline payments.
A digital currency system that can facilitate offline transactions is seen as a way to improve financial inclusion in emerging economies such as India. Approaches to solving this problem include testing the use of wearables, Bluetooth technology, credit and debit cards, and smartphones. The RBI has received more than 50 proposals from various companies and developers on possible solutions to the problem of offline transactions.
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| Crypto transactions in India are now subject to AML laws |
Increasing the level of adoption has been a struggle for CBDC pilots around the world.
Early results from India’s wCBDC trial indicated a low level of interest from banks, who saw little to no advantages with the new system. But adoption of the retail version of the digital rupee got a boost in February when Reliance Retail, India’s single-largest retailer and part of the country’s Reliance conglomerate, began accepting payments via the e-rupee in all 17,000 of its stores.
In Nigeria – which has become the global test case for CBDC implementation – early adoption was abysmal a year into its launch as only 0.5% of Nigeria’s population of 217 million was using the eNaira. This prompted the country’s central bank to implement withdrawal limits on the amount of cash that citizens can take out of their bank accounts in an attempt to push its “cash-less Nigeria” policy and increase the use of the eNaira.
The implementation of withdrawal limits, and the subsequent cash shortage that it inspired, has led to a 63% increase in the value of eNaira transactions this year, with more than 22 billion naira ($47.7 million) processed so far. Thirteen million e-wallets have also been created, a more than twelve-fold increase from October, according to Godwin Emefiele, governor of the Central Bank of Nigeria (CBN).
