India’s CBDC activity declines sharply after artificial pump: report

India’s digital currency, known as the e-rupee, is experiencing a sharp decline in activity after local banks ceased artificially inflating its metrics.

India‘s central bank digital currency (CBDC) appears to be losing momentum, dropping sharply to a fraction of its peak observed in December 2023.

According to Reuters, which cites sources familiar with the matter, the Reserve Bank of India (RBI) succeeded in achieving a milestone of 1 million retail transactions last December only after metrics were artificially infiltrated by local banks which offered “incentives […] to retail users and the disbursement of a portion of bank employees’ salaries using the e-rupee.”

“However, now that the incentives have been withdrawn, daily transaction numbers have declined to about 100,000. A lack of organic demand to use the e-rupee is evident.”

Reuters’ sources

The sources note that the RBI had earlier asked banks to increase transactions to at least 1 million per day by late 2023 to “test the system’s resilience at scale.” However, this push has now ceased, raising questions about the future of the RBI’s digital currency initiatives amid the stark contrast between artificially inflated metrics and actual usage.

Earlier in mid-June, the Bank for International Settlements (BIS) released a report, showcasing that only 12% of central banks are planning to issue retail CBDCs in the mid-term. According to the survey results, the likelihood that a wholesale CBDC will be issued within the next six years is now “greater than that for retail,” BIS says, adding that there could be nine wholesale CBDCs “publicly circulating towards the end of this decade.”

The international financial institution says central banks are still interested in wholesale CBDCs mainly due to their desire to “enhance cross-border payments,” in both advanced economies and emerging market and developing economies.