JAN 6, 2024
India’s CBDC reaches 1 million daily transactions milestone
India’s digital currency transactions have surged, surpassing 1 million daily transactions in December, meeting the Reserve Bank of India’s (RBI) ambitious target set for the end of 2023.
CBDC-based employee payments
Reuters cited three sources familiar with the matter who have revealed that Indian banks played a crucial role in achieving this milestone by disbursing certain employee benefits through the central bank’s digital currency (CBDC), known as the e-rupee.
As Indian crypto influencer and YouTuber Sumit Kapoor put it, the transaction level increase “..happened because people working in regular banks were encouraged to use digital rupees instead of the normal money for their deposits and benefits.”
RPI letter confirms increase
A letter seen by CoinDesk sent by the Governor of the Reserve Bank of India (RBI), Shaktikanta Das, to RBI staff on December 29 confirmed the increased CBDC use, stating that it “exceeded the milestone of 1 million transactions in a day on Dec. 27, 2023.”
The e-rupee, developed as a digital counterpart to physical cash, utilizes distributed ledger technology. The RBI initiated the e-rupee pilot in December 2022, initially recording an average of 25,000 daily transactions by the end of October. Despite its integration with the Unified Payments Interface (UPI), a popular framework for mobile app-based peer-to-peer money transfers, the transaction volume saw a substantial increase last month.
Union Bank payments
According to India’s Economic Times, the Union Bank of India is working towards transferring claims related to a number of employee benefits to CBDC wallets rather than the accounts of those salaried employees. Union Bank stated:
“With an aim to promote CBDC wallet transactions, banks have been advised to encourage all staff members to transact using the digital currency and ensure 100% staff registration on digital rupee app.”
Other banks have been playing their part in the current transaction level surge. This has included major private and state-run lenders such as HDFC Bank, Kotak Mahindra Bank, Axis Bank, Canara Bank and IDFC First Bank. These institutions disbursed employee benefits directly into CBDC wallets rather than traditional salary accounts, demonstrating a significant shift in adoption patterns.
The RBI anticipates that non-financial firms will follow suit, contributing to a further boost in transaction volumes. The user base for the e-rupee has also witnessed steady growth, reaching approximately 4 million users, up from 3 million in December, according to an executive familiar with the pilot.
Globally, several countries, including China, France and Ghana, are in the pilot stages of their central bank digital currency (CBDC) projects. Nigeria has rolled out its digital currency, although success has been limited despite offering incentives such as discounts on auto-rickshaw rides.
To incentivize e-rupee transactions, Indian banks are offering rewards, aligning with the RBI’s push to enhance transaction volumes. Sharat Chandra, co-founder of the India Blockchain Forum, commended the move to compensate employees using CBDC and suggested expanding adoption incentives to other areas, such as toll tax collections, to further encourage widespread usage. The positive momentum in India’s digital currency landscape reflects a growing trend toward embracing innovative financial technologies.