The Reserve Bank of India's Central Bank Digital Currency pilot in the retail segment has components backed by blockchain technology and has several common features with physical cash, Minister of State for Finance Pankaj Chaudhary told the Lok Sabha on Monday.
CBDCs, a digital form of currency notes issued by a central bank, are under trial in India. The RBI launched the pilot for the retail segment for a closed group of participating customers and merchants on December 1.
While the Union Minister did not elaborate further on the use of blockchain technology for CBDCs, he added that the 'Digital Rupee' – as the CBDC pilot is being called – has several features of physical currency.
"It ('Digital Rupee') has been issued in the same denominations as the paper currency and coins...It offers features of physical cash like trust, safety and settlement finality," the official government communique said.
The Minister added that the CBDC will not earn any interest but can be converted into bank deposits.
On the use of wholesale CBDCs, the trial began on November 1 for settling secondary market transactions in government securities; the Minister told the Lok Sabha that they are expected to make the inter-bank market more efficient.
"Settlement in central bank money would reduce transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk," he noted.
On October 7 this year, the RBI released its concept note on CBDC, which discussed key considerations such as technology and design choices, possible use cases and issuance mechanisms.