The Reserve Bank of India, the country’s central bank, will launch a wholesale digital currency pilot program on Tuesday with the goal of lowering transaction costs and the need for collateral when trading government securities.
According to the Indian central bank press release, the use of the digital rupee eliminates the need for settlement guarantee infrastructure or collateral to mitigate settlement risk.
The pilot involved nine banks, including HSBC, ICICI Bank, State Bank of India, and Union Bank of India, and will serve as a model for future pilots testing other wholesale transactions and cross-border payments using digital currency, according to the RBI.
A digital rupee pilot designed for retail transactions is set to begin within the next month.
According to the RBI, the digital rupee pilot “is expected to make the inter-bank market more efficient.” “Settlement in central bank money would save money by eliminating the need for settlement guarantee infrastructure or collateral to mitigate settlement risk.
Based on the lessons learned from this pilot, future pilots will focus on other wholesale transactions and cross-border payments.”