Reserve Bank of India (RBI) in Talks with Other Central Banks to Promote Digital Rupee for Cross-border Payments

With 19 of the G20 nations in the advanced stage of Central Bank Digital Currency (CBDC) development, the most populous country in the world, the Republic of India, has been working towards the same goal. According to a recent report by the Economic Times, the Reserve Bank of India (RBI) is currently in discussions with more than 18 global central banks on how to use the digital rupee in cross-border payments. The South Asian country has seen its economy significantly grow in the past few years fueled by modern technology adoption.

Indian Market and Digital Rupee

The report noted that RBI Governor, Shaktikanta Das, has severally pointed out the importance of foreign trade infrastructure for the digital rupee. India already hosts billions of cross-border payments from its citizens working abroad. However, it is worth noting that most of the need for third parties in cross-border payments has significantly been reduced since the onset of Bitcoin and other crypto assets. Moreover, the RBI forecasts the digital rupee will hit 1 million users soon.

“But cross-border payments will also become much quicker, more seamless, and very cost-effective. That is another area where a lot of attention needs to be given. We are constantly in dialogue with other central banks that have introduced or are introducing CBDCs,” Shaktikanta noted during a speech in London recently.

With the supply of the United States dollar becoming a hustle to traders seeking to import goods in most countries, Shaktikanta highlighted that a digital rupee will help streamline the supply chain. Moreover, more countries will have digital rupee in their Vostro accounts to facilitate seamless cross-border payments with less friction.

“In India, we have no shortage of dollars, but in some other markets, due to a shortage of dollars, they are unable to do imports,” Shaktikanta added.

Bigger Picture

India has already joined forces with other countries including Russia, China, Brazil, and South Africa in breaking away from the United States dollar dependence as the global reserve currency. Undeniably, the United States regulators are already feeling the heat of more countries ditching the dollar as the reserve currency. Moreover, inflation has been rising despite the Fed’s rising interest rates in the past 10 months.

Undeniably, the RBI intends to counter the rising use of Bitcoin among other crypto assets as a means of fast payments.

However, the Indian government has severely tried to ban the use of crypto assets to no avail in the past few years. In response, the Indian government has imposed a harsh crypto tax for crypto uses in a bid to discourage their use.