By Arun Kumar Shrivastav
The Reserve Bank of India (RBI) has announced that the retail e-rupee has accomplished the first milestone set for it – 50,000 users. Launched on December 1, 2022, the e-rupee is India’s Central Bank Digital Currency (CBDC) pilot which was launched within a closed group of banks and merchants in four select cities. The first phase of the pilot was intended to onboard 50,000 users and 5,000 merchants, which it accomplished early this month, RBI’s Deputy Governor Rabi Sankar said at a press conference on February 8. It seems the e-rupee pilot is not onboarding new users at the moment and is preparing for the next round of its pilot in which e-rupee will be available in more cities and banks. At that stage, it will once again start onboarding new users.
At the press conference, Sankar informed that the Indian government is not in a hurry to introduce CBDC in a wholesome manner. Rather, it would like to see how its introduction is impacting the functions in banking and finance and if any lessons need to be learnt. Back in February 2022 when Finance Minister Nirmala Sitharaman announced that the country would launch its CBDC, she said it would introduce better cash management and give a boost to the digital economy. India launching CBDC in a guarded manner in late 2022 is at least two years behind China which began experimenting with its CBDC in 2020. To make digital Yuan (e-CNY) popular among users, the Chinese government has made the free distribution of e-CNY worth over $26 million coinciding with the Spring Festival holidays, a 7-day period starting from the New Chinese Year.
The use of digital currency is increasingly being explored for faster movement of money. For example, your digital currency holdings move along with you even when you don’t carry them. Early this month, global digital payments company Visa’s VP and Head of Crypto Cuy Sheffield made a presentation at StarkWare Sessions a Tel Aviv, Israel. At this two-day Ethereumblockchain community event, Sheffield announced that Visa is investing in developing a platform where digital assets can be seamlessly converted into fiat currencies and vice versa. To enable this, he said Visa is planning to use USDC, a stablecoin. Earlier, speaking at the Visa’s annual shareholder meeting, its CEO Al Kelly said that both stablecoins and CBDCs have the potentials to play a meaningful role in global payments.
“We set all over Swift, so we can’t move money as frequently as we’d like because there are a number of limitations that exist in those networks. And so, we’ve been experimenting, we publicly announced. We’ve been testing how to actually accept settlement payments [with stablecoins],” Sheffield explained.
The world of banking and finance has come to the stage where Swift is just not enough and faster and more efficient alternatives are being looked for. Three years ago, and when it was not embroiled in the legal dispute with the United States Securities and Exchange Commission (SEC), Ripple Labs which provides real-time gross settlement services was believed to unseat Swift in a few years. This blockchain-based payment settlement company provides liquidity solutions to remittance networks across different geographies. Its native coin XRP which plays a key role in facilitating the liquidity solution for global payments is currently trading at $0.40. Ripple Labs have been charged by the SEC with selling unregistered securities worth $1.3 billion. SEC says Ripple and its co-founders raised $1.3 billion over a seven-year period beginning in 2013 from investors by selling XRP, whose price was going to be determined by the market forces but was not registered as securities.
Well, the twist in the tale is Jimmy Vallee, Managing Director of Valhill Capital, says that XRP has the potential to become the reserve currency of the world and the United States government should buy back the entire XRP supply from retail and individual governments around the globe should buy as much XRP as they can. Vallee also offers a buyback price for XRP. And it’s $37,500 per unit. The price has been derived by dividing the total global wealth by the total supply of XRP. Now, if nothing else, it is quite amusing news for the XRP community whose tokens are currently priced at $0.40 and might sell for as much as $37,500, if Vallee’s theory is ever going to come true.
In the Ripple vs. SEC case which is in its third year now, it’s sometimes difficult to understand why SEC is steadfastly pursuing the case against Ripple. Is it that SEC and the US government want to keep Ripple under its grip given its potential to replace Swift and similar other global payment systems? Ripple CEO Garlinghouse says his company is now not considering the US in its scheme of things. So if it loses the case to SEC, it might not affect its vision and business.
Returning to the Indian CBDC trials, we can’t expect our central bank to be oblivious to what is happening at the global level. Its statements must reflect knowledge and appreciation of important innovations taking place in this space. (IPA Service)