Cred Becomes 1st Fintech Platform to Roll Out Access to CBDC e-Rupee

Cred, a fintech platform backed by Tiger Global and Peak XV, has become the first fintech company to roll out access to India's central bank digital currency (CBDC), known as the e-rupee.

The Reserve Bank of India (RBI) initiated a pilot for the e-rupee in December 2022, initially allowing only banks to offer access. However, in April 2024, the RBI expanded the pilot to include payment firms.

Cred will initially roll out access to its e-rupee wallet to a select set of users, with the issuance of e-rupee tokens facilitated by YES Bank. The goal is to make e-rupee transactions seamless and drive adoption among creditworthy users.

Kunal Shah, the founder of Cred, stated that their goal is to make e-rupee transactions frictionless and drive its adoption among the most creditworthy Indians.

While e-rupee transactions had surged initially, they have since declined, reflecting the global challenge central banks face in popularizing digital currencies.

Cred's platform is known for catering to creditworthy users, making it an ideal partner for the initial rollout of the e-rupee to ensure a smooth and reliable implementation.

Other payment firms like GooglePay, PhonePe, AmazonPay, and MobiKwik are also expected to join the digital currency pilot.

RBI to Test CBDC With Its Own Officials

The Reserve Bank of India (RBI) is planning to test its Central Bank Digital Currency (CBDC) by crediting a portion of allowances to the digital wallets of its officers reports Economic Times citing an internal communique to senior officials of the central bank.

The RBI internal communique dated December 27, said, “As a part of scaling up of CBDC retail pilot and to encourage the use of CBDC wallet by the officers of the bank (RBI), it has been decided to credit the reimbursement amount towards internet/data charges to the CBDC wallets of officers…”

A user manual for updating the CBDC wallets has been circulated. The testing phase involves various aspects such as security, transaction speed, and user experience to ensure a smooth rollout.

This move is part of a broader effort to explore the potential of CBDCs and understand how they can be integrated into the existing financial system.

The Reserve Bank of India (RBI) has been actively exploring the concept of a Central Bank Digital Currency (CBDC). Recently, there have been reports about RBI officials conducting tests to understand the potential impact and functionality of a CBDC in the Indian financial system.

These tests are part of a broader initiative to evaluate how a digital currency issued by the central bank could be integrated into the existing monetary framework. The RBI is considering various aspects, including the technological infrastructure, security measures, and the potential economic implications of introducing a CBDC.

TCS and Deeptech Co. Crunchfish Join Hands for Digital Currency (CBDC) Projects Around the World

Deeptech company Crunchfish and Indian IT giant Tata Consultancy Services (TCS) have recently formed an alliance agreement to enhance the Quartz solution for Central Bank Digital Currency (CBDC) projects.

The collaboration aims to provide offline payment capabilities for CBDCs, allowing cash-like functionality in digital form.

Crunchfish, a Swedish company specializing in digital cash solutions, has been listed on Nasdaq First North Growth Market since 2016, with headquarters in Malmö, Sweden, and a subsidiary in India.

Together, Crunchfish and TCS will target Central Bank Digital Currency (CBDC) projects around the world where Crunchfish will augment the Quartz solution for CBDCs with offline payments capabilities. Developed by TCS, Quartz provides foundational technology, tools, and business components for CBDCs. It harnesses the power of next-gen technologies, including DLT (Distributed Ledger Technology) and AI/ML.

Quartz enables secure integration of CBDCs with data-intensive banking operations.

Crunchfish complements Quartz by providing device-agnostic trusted client applications for offline payments. These applications can be used in both CBDCs and commercial payment systems. Offline payment availability is crucial for CBDC projects.

The combined solution enhances both the backend and frontend of CBDC implementations. It ensures resilience, scalability, and security for CBDCs. Crunchfish and TCS will collaborate to offer this solution to central banks around the world, and other entities integrating CBDCs into their business landscape.

Several companies and organizations are actively involved in the development and exploration of Central Bank Digital Currencies (CBDCs).

China's digital yuan pilot is the largest in the world, reaching 260 million wallets across 25 cities. It has been used for various purposes, including transit, healthcare, and even purchasing crude oil.

The New York Federal Reserve has launched a Digital Dollar Pilot Program in collaboration with major banks and global payments provider Swift . Participants include BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, U.S. Bank, and Wells Fargo.

BRICS founding members (Brazil, Russia, India, China, and South Africa) are exploring CBDCs. Several new members (Saudi Arabia, Iran, and the UAE) are also exploring cross-border wholesale CBDCs. Just a couple of month back, Iran has confirmed its collaboration with Russia on developing Central Bank Digital Currencies (CBDC) and tokenized assets for payments.

Mastercard, PayPal, Fiserv, and Stripe have weighed in on CBDCs, with their comments publicly available for viewing on the Fed's website.

The European Central Bank is actively preparing for the launch of the digital euro, conducting practical tests and settling transactions in a controlled environment.

Notably, CBDC development involves collaboration between governments, financial institutions, and tech companies. The landscape is dynamic, with ongoing exploration and pilots worldwide.

Iran and Russia Developing CBDC, Tokenized Assets for Payments for Cross-Border Transactions

Iran has confirmed its collaboration with Russia on developing Central Bank Digital Currencies (CBDC) and tokenized assets for payments. This initiative is part of their efforts to facilitate trade transactions and mitigate the impact of sanctions, as both countries are currently unable to use SWIFT for cross-border payments and have limitations on trading in dollars or euros.

The two nations are exploring the use of Iran's crypto-rial and Russia's digital ruble for bilateral trade. The move is seen as a way to simplify trade transactions and resolve issues related to fiat currency conversion rates, which can lead to significant business operation costs.

Due to US sanctions, Iran and Russia are unable to make settlements in Dollars and Euros, Russia and Iran have switched to the use of national currencies, said Maxim Chereshnev, chairman of the board of the Council for the Development of Foreign Trade and International Economic Relations. However, difficulties arise with conversion. And also due to the inconsistency of the market rate in Iran with the state. "Starting payments through CFA and digital currencies of central banks can simplify trading", Chereshnev said with surity.

The two countries have strengthened their economic ties, with Russia being one of Iran’s largest trading partners. Russia has invested in Iran’s energy sector, and the two countries have discussed cooperation in areas such as transportation and infrastructure development.

Russia has recently passed legislation allowing the use of digital financial assets (DFAs), such as tokenized gold, for cross-border payments, which is a shift from their previous stance where such assets were not permitted for payments. This change is aimed at circumventing sanctions and facilitating international trade between Russia and Iran.

The practical implementation of these digital currencies and assets is still under development, with cross-border CBDC settlements expected to be possible starting January 1, 2025, following the establishment of the necessary legal framework in Russia. This collaboration marks a significant step in the use of digital currencies in international trade, particularly among countries facing economic sanctions.

Experts say that, CBDCs can significantly improve the efficiency of cross-border payments by reducing the time it takes to process transactions. Traditional cross- border payments can take several days due to the involvement of multiple intermediaries, but CBDCs can streamline this process.

As of March 2024, there are a few countries that have functioning CBDCs and are exploring or using them for cross-border transactions.

The Bahamas, Jamaica, and Nigeria have functioning CBDCs. Moreover, the 5-Nations group – Brazil, Russia, India, China, and South Africa (BRICS), along with new members like Saudi Arabia, Iran, and the UAE, are in the pilot phase of CBDC exploration for cross-border wholesale transactions.

Australia and China are among the countries piloting use cases for their CBDCs, which may include cross-border transactions.

Additionally, SWIFT, the global provider of secure financial messaging services, has been working on solutions to enable financial institutions to incorporate CBDCs and other digital assets into common business practices, which includes cross-border transactions. This indicates a growing trend towards the adoption of CBDCs in international trade and finance.

Reliance Industries' JFS To Enter Web3 with Blockchain and Digital Currencies

Mukesh Ambani promoted Reliance Industries' demerged financial division – Jio Financial Services – plans to explore blockchain and Central Bank Digital Currencies (CBDCs) including the eRupee, which is currently in advanced trials in India.

Mukesh Ambani, one of the world's richest men, annnounced this Web3-related plans during the 46th annual general meeting of Reliance Industries (RIL) that was held on Monday.

"JFS will consolidate its payment infrastructure, with a ubiquitous offering for both consumers and merchants further driving digital adoption for India," Ambani said. "JFS products will not just compete with current industry benchmarks but also explore pathbreaking features such as blockchain-based platforms and CBDC. They will adhere to the highest standards of security, regulatory norms and ensure protection of customer transaction data at all times."

Notably, RIL's other subsidiaries like Reliance Retail and General Insurance service are already accepting eRupee, a CBDC of India.

Late last month, Jio Financial Services partnered with Blackrock to form Jio BlackRock, a 50:50 joint venture that combines the respective strengths and trusted brands of BlackRock and Jio Financial Services.

For Web3, RIL had already anticipated the foray into the segment when in February of last year, Jio Platforms, an another subsidiary of RIL, had invested $15 million in Pranav Mistry founded deep-tech startup, Two Platforms Inc. (Two), for 25% equity stake acquisition in the startup.

RBI Commences 1st Pilot of Digital Rupee e₹

The Reserve Bank of India (RBI) today launches the digital rupee – e₹ – for the wholesale segment as part of its first pilot test programme to review and improve the currency’s functionality.

"The first pilot in the Digital Rupee - Wholesale segment (e₹-W) shall commence on November 1, 2022", said the press release by the RBI.

This first pilot in Digital Rupee - Retail segment (e₹-W) is in select locations in closed user groups comprising customers and merchants. The details regarding operationalisation of e₹-W pilot shall be communicated by the RBI in due course.

Nine banks — State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC have been identified for participation in the pilot.

The use case for this pilot is settlement of secondary market transactions in government securities.

Use of e₹-W is expected to make the inter-bank market more efficient. Settlement in central bank money would reduce transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk. Going forward, other wholesale transactions, and cross-border payments will be the focus of future pilots, based on the learnings from this pilot.

In early last month, RBI issued a concept note on central bank digital currency (CBDC), listing the risks and benefits of introducing these currencies.

CBDC is legal tender issued in digital form. It is the same as fiat currency and is exchangeable one-to-one with government-issued money.