The Design Choices for India's own CBDC - e₹ (Digital Rupee)

 The Design Choices for India's own CBDC - e₹ (Digital Rupee)

          As per RBI concept paper on CBDCs, as CBDCs are an electronic form of sovereign currency, they should imbibe all the possible features of physical currency.

The e₹ (Digital Rupee) is the final product and the creative process toward the final product has to be designed.

Though the design is a creative process it has economic consequences insofar as a product's shape, configuration and performance affect its marketability and its cost of production.

The design of CBDC is dependent on the functions it is expected to perform, and the design determines its implications for payment systems, monetary policy as well as the structure and stability of the financial system.

One of the main considerations is that the design features of CBDCs should be least disruptive.

The least disruptive consideration will enable the general public to quickly adopt ERs as and when they are open to the general public.

 

The key design choices to be considered for issuing CBDCs include:

(i) Type of CBDC to be issued - (Wholesale CBDC and/or Retail CBDC),

(ii) Models for issuance and management of CBDCs (Direct, Indirect or Hybrid model),

(iii) Form of CBDC (Token-based or Account-based),

(iv) Instrument Design (Remunerated or Non-remunerated)

and (v) Degree of Anonymity

 

Highlights of the above Design Choices for India’s own e₹ (Digital Rupee)

 

(i)            Type of CBDC to be issued - (Wholesale CBDC and/or Retail CBDC),

Highlight A) As the word denotes, Wholesale e₹ (Digital Rupee) is for high volume, high-value transactions.

Highlight B) As the word denotes, Retail e₹ (Digital Rupee) is for low volume, low-value transactions

 

(ii) Models for issuance and management of CBDCs (Direct, Indirect or Hybrid model),

Highlight A) Direct – Direct claim on the Central Bank

Highlight B) Indirect - Indirect claim on the Central Bank via intermediaries

Highlight C) Hybrid – Hybrid claim on the Central Bank, but with a backup infrastructure

 

(iii) Form of CBDC (Token-based or Account-based),

Highlight A) Token-based _ As the name suggests, e₹ (Digital Rupee) are held as Tokens which can be compared to physical cash. CBDC Tokens will be in electronic mode, and cannot be seen or felt physically.

Highlight B) Account-based _ As the name suggests, e₹ (Digital Rupee) are held in Accounts and can be seen as book entries only.

 

 

(iv) Instrument Design (Remunerated or Non-remunerated)

Highlight A) Remunerated _ This is similar to Interest paid for balances held in Saving Bank Accounts

Highlight B) Non-remunerated _ This is similar to non-Interest balances held in Current Accounts

 

and (v) Degree of Anonymity

Highlight A) Another word of ‘Anonymity’, is secrecy. Anonymity in CBDCs may mean as to how much of the CBDC Token history should be collected and stored.

Highlight B) As per the concept paper, Anonymity may be there for low-value transactions, up to a predefined turnover per Unique Identifier.

Disclaimer: These are my personal thoughts only. The bottom line is Safe ePayments. Nothing More – Nothing Less. 

I am responsible for any errors if any.

Copyrights, if any belong to the original copyright holder only.