India’s Central Bank Digital Currency (CBDC) i.e. Digital Rupee (e₹) seems to be in a strange situation. On one hand, there is confusion within the RBI as to what should be its proper use case, and on the other hand, the private sector is trying to adopt it and use it in new ways.

Private Sector Action: MobiKwik, Flipkart and PhonePe’s Game

MobiKwik has launched its CBDC wallet in collaboration with Yes Bank. Flipkart and PhonePe are also preparing to introduce Digital Rupee on their platforms. Flipkart is developing a blockchain-based CBDC solution in collaboration with Polygon and a large private bank, in which transaction fees can also be saved.

For example, if Supercoins are earned on Flipkart, then there is a third-party role like Razorpay to use them, which charges a fee. But if these Supercoins are backed by Digital Rupee, then they can be transferred directly to the merchant’s account without any extra cost.

CBDC-based Loyalty Program: New Scope for Small Business

Xaults Technologies, which was the winner of RBI’s 2024 “Harbinger – Innovation for Transformation” hackathon, is now launching a CBDC-based loyalty program in collaboration with Bank of Baroda and SBI Payments. Its target will be small merchants, so that they can also get the benefit of Digital Rupee.

Entry of Digital Rupee in Government Schemes

It is also being used limitedly in the public sector. The funds transferred to women in the “Subhadra Yojana” scheme of the Odisha government were sent through Digital Rupee.

Then what is the problem?

But the biggest issue of Digital Rupee is that RBI itself is not sure in which direction it should be taken. Sometimes it is being seen as a replacement for cash, sometimes a case is being made for using it for cross-border payments, and sometimes the concept of CBDC-backed digital banking is emerging.

Cred has also launched its CBDC wallet beta version, which supports UPI QR code scanning, peer-to-peer transfer and merchant payments.

Trump Factor: Can CBDC face a setback at the global level?

Another interesting angle is that if Donald Trump becomes the US President again, CBDC adoption at the global level may slow down. Trump has been against CBDC earlier as well and he says that he can ban it. If the US opposes it, then many countries may become cautious about it.

Does Digital Rupee have a future?

Digital Rupee is currently a confused project in India. A clear policy from RBI is still awaited, but the private sector is trying to innovate it. If the government and RBI are a little proactive, India’s CBDC can become a game-changer for the fintech industry. Otherwise, this will remain another “good but useless” initiative.