The decline in usage of India’s digital currency, the e-rupee, illustrates the challenges faced by countries trying to encourage public adoption of digital currencies.
Despite a promising start with the Reserve Bank of India’s pilot achieving 1 million daily retail transactions by December 2023, the numbers have plummeted to approximately 100,000 daily transactions.
The initial success was largely driven by banks incentivizing transactions and disbursing part of their employees’ salaries in e-rupees.
This push has now waned, leading to the significant drop in transaction numbers. This pattern of initial enthusiasm followed by a decline is not unique to India and reflects broader difficulties in sustaining public interest and trust in digital currencies.
The significant drop in e-rupee usage highlights a lack of organic demand for the digital currency, according to a third source, a banker involved in the project.
Reserve Bank of India
This indicates that without external incentives, the public’s interest and willingness to use the e-rupee are limited.
The sources, who declined to be identified due to restrictions on speaking to the media, revealed that the Reserve Bank of India (RBI) did not respond to an email seeking comment, and the data on retail transactions via the e-rupee is not publicly disclosed.
According to these sources, the remaining transactions are partly sustained by banks disbursing benefits to their employees via the e-rupee, which helps boost daily transactions to about 250,000 to 300,000 towards the end of each month.
The RBI had directed banks to increase e-rupee transactions to at least 1 million per day by late 2023 to “test the system’s resilience at scale,” according to the second source. However, this push has ceased.
The RBI is currently not planning to rapidly expand the pilot; instead, it is focusing on testing the technology and developing use cases for the digital currency, the source added.
“Adoption should grow as more use cases develop,” the source added.
Globally, according to a survey by the Bank of International Settlements, one-third of central banks are currently conducting pilots for central bank digital currencies (CBDCs).
However, even those CBDCs that have been launched, such as in the Caribbean by the Bahamas and Jamaica, have experienced only limited success, as noted by the Federal Reserve Bank of Kansas City in an April report.
This suggests that while there is significant interest and experimentation with CBDCs globally, achieving widespread adoption and success remains a challenge in various regions.
“We have observed that to spur adoption, consumers may need more than just (retail) CBDC technology. They may need the (retail) CBDC to add value relative to cash.”
