Written by Jaspreet Kalra
MUMBAI (Reuters) – Use of India’s digital currency, the e-rupee, has fallen to a tenth of its December peak, four sources said, reflecting the difficulties many countries have faced trying to rally public support for digital currencies.
The Reserve Bank of India began a pilot of the e-rupee, which is designed as a digital alternative to physical cash, in December 2022, and successfully reached the target of 1 million retail transactions per day by December 2023.
The achievement came only after banks were asked to increase transactions by offering incentives to retail users and disbursing a portion of bank employees’ salaries using e-rupee.
But now that the campaign has waned, daily transaction numbers have dropped to about 100,000, two of the sources, who are directly involved in the pilot, said.
A third source, a banker involved in the project, said this indicates that there is little organic demand for the use of the e-rupee.
The sources requested to reveal their identity because they are not allowed to speak to the media. The Reserve Bank of India (RBI) did not respond to an email seeking comment and data on retail e-rupee transactions has not been publicly disclosed.
The four sources said the ongoing transactions were partly due to banks distributing benefits to their employees via the e-rupee.
The two sources mentioned earlier said this helped increase transactions to about 250,000 to 300,000 per day towards the end of each month.
The Reserve Bank of India asked banks to increase transactions to at least 1 million per day by late 2023 because it wanted to “test the resilience of the system on a large scale,” but that push has now stopped, the second source said.
The RBI does not plan to expand the pilot program quickly, and the current focus is on testing the technology and developing use cases for the digital currency, the source said.
“Adoption should grow as more use cases develop,” the source added.
Globally, of the 86 central banks surveyed by the Bank for International Settlements, a third of central banks are piloting a central bank digital currency (CBDC).
Even those that have been launched, such as in the Caribbean by the Bahamas and Jamaica, have had only limited success, the Federal Reserve Bank of Kansas City said in an April note.
“We have observed that to drive adoption, consumers may need more than just (retail) CBDC technology. They may need (retail) CBDC to add value compared to cash.”