MUMBAI Transactions via central bank digital currencies CBDCs would remain anonymous to a certain degree, a top official at the Reserve Bank of India said on Wednesday. Technology and legal provisions can be explored to ensure anonymity.
India started a pilot project for its digital currency, or e-rupee, on Nov 1, when it was opened for initial trial.
The scope of the project was expanded to include consumers and retailers-led transactions from December 1st, only being used by banks for settlements with each other.
The RBI has started testing both the wholesale and retail versions of e-rupee using distributed-ledger technology as an alternative to cash.
It is possible to get a legal provision to ensure anonymity, deputy governor of Reserve Bank of India, T Rabi Sankar said in a post policy media briefing on Wednesday.
How things evolve, but anonymity is a basic feature of currency and we will have to make sure that with CBDCs Sankar added.
The RBI hasn't clarified the degree to which CBDC transactions will be anonymous, but the income tax department allows cash transactions up to a certain limit without any government identity proof and the same rules may apply, RBI governor Shaktikanta Das said at a post policy press conference.
At present, it is mandatory to provide a Proof of Permanent Account Number, a unique 10 digit alphanumeric number issued by the Income Tax Department to taxpayers, for deposits above 50,000 rupees $606.00 Bankers are concerned that the project doesn't have any benefits from CBDCs, which is similar to internet-based banking transactions.
Many people think the Unified Payments Interface UPI could be a tough rival for retail use of e-Rupee, because they say it's a hard competitor for the Instant Real-Time Consumer Payments System that lets users transfer money between banks without disclosing account details.
The central bank has maintained that there are differences and advantages to both, which ensures adoption of e-rupee.
E-rupee is money, UPI is a payment method, said Sankar, RBI's Sankar.
It is possible that two private entities can provide wallet features and money can move in between them, if you use the digital currency as a payment of cash. He said that it is not possible to have UPI from one bank to the other. He said that e-rupee provides privacy unlike UPI.