An anonymous senior insider with the Reserve Bank of India (RBI), in a recent exclusive interview with CoinDesk, revealed plans by the Indian financial authority to correct last-minute privacy and legislative lapses in the proposed CBDC, the digital rupee before a widespread rollout. The interview, published on February 2, 2024, identified the insider (simply) as a “senior official” throughout the report to maintain his anonymity, as he revealed some classified information about the progress achieved with the digital rupee pilot program.
In the anonymous interview, the senior official suggested the RBI would tackle privacy concerns with technology. Many experts earlier speculated that privacy legislation would be the preferred approach. The official also implied plans to take a hands-off approach to CBDC taxation, stating, “Not only are taxes not in our mandate or domain, it is also not our concern.”
The Reserve Bank of India hasn’t released any recent official statements about its plans to tackle privacy concerns or address taxation on its proposed CBDC.
Analysts Decry Privacy Risks With the Indian CBDC
The pilot of the digital rupee has attracted widespread criticism from the cryptocurrency community, primarily due to the privacy concern associated with central bank digital currencies in general. Gaining insight into privacy concerns requires a conceptual understanding of how the digital currency should (conceptually) operate.
The Reserve Bank of India issues, controls, and regulates the digital rupee, purportedly ensuring its stability and value. However, this unfettered control over the currency allows the RBI to freeze digital rupees in wallets. Some also expressed concerns over the central bank attempting to program the currency, only making it usable for ‘approved’ payments.
These concerns impact public trust in the CBDC, leading to poor adoption plaguing most implementations of CBDCs worldwide, including India.
RBI to Address Privacy Risks Through Legislation, Technology
Earlier, an insider from the RBI hinted that the bank plans to address the privacy concerns by seeking legislation authorizing them to allow users to delete transactions to maintain privacy and anonymity. With the latest CoinDesk interview, however, it seems like the RBI is now exploring the use of ‘technology’ to address the privacy risks of the CBDC.
“A privacy legislation is not the only way, Other ways to tackle this problem – particularly technology – do exist, and our team is exploring that, too,” the senior insider reportedly told CoinDesk in the exclusive interview.
While technology and legislation are effective ways to address the privacy risks associated with CBDCs, neither of them is sufficient in isolation. However, having the parliament advance legislation to technologically (bottleneck) control over the digital currency might be all the digital rupee needs to gain public trust.
Experts-Digital Rupee May Launch Fully by Early 2024
A 2023 report from Financial Express suggested the Reserve Bank of India is pursuing an early 2024 launch for the CBDC. While quoting a senior bank official from one of the leading Indian banks, the report predicted a January launch date for the digital rupee.
That prediction has failed to materialize. On the other hand, an early 2024 launch isn’t off the books, with more anonymous high-profile officials from the RBI coming out to leak details of the proposed digital currency. The pilot program succeeded wildly, hitting 1 million transactions in a day, and the event will likely catalyze the launch of the CBDC.
The Journey So Far
In 2022, the Reserve Bank of India launched a pilot program for its central bank digital currency, the e-rupee, bringing it to retail users for the first time. As expected, the pilot program attracted some criticism, with most highlighting the RBI’s excessive control over the new digital currency.
The digital rupee failed to attract as much attention as the RBI had hoped, with the bank needing to resort to aggressive tactics to encourage adoption among the Indian public. A bank reportedly admitted being pressured to deposit employee funds and benefits in the new CBDC in a letter that nearly coincided with the announcement that digital rupee usage has exceeded 1 million daily transactions.
In a March 2023 interview, an official with the RBI declared that the digital rupee pilot program has attracted over 100,000 customers across 13 banks, which is hardly impressive for a populous country like India. However, the pilot program is only active in 15 cities, making the numbers somewhat justified.
