Coding Cash

The digital rupee has been around for nearly two years now, despite facing several challenges. With cash still remaining the king in India, the future of CBDC hinges on its programming and versatility

- TEENA JAIN KAUSHAL

THE BAHAMAS, A stunning archipelago comprising 700 islands, encounters significant challenges round the year due to its extreme weather conditions and geographical isolation. Many of these areas lack the necessary infrastructure for traditional banking, including bank branches and ATMs. In October 2020, in a move towards providing reliable banking services, the Bahamas launched sand dollar, a Central Bank Digital Currency (CBDC). This marks a major milestone in the expansion of digital banking and helps the Bahamas join the ranks of nations that have successfully implemented CBDC.

In a little over three years, the sand dollar has completely transformed the banking system in the island nation. Powered by blockchain technology and directly tied to the Bahamian dollar, it has successfully filled the void left by traditional banking systems in the Bahamas. With more than 100,000 registered wallets, which is roughly 25% of the Bahamian population, the sand dollar is a novel solution for promoting financial inclusion.

In contrast, the CBDC launched by the Reserve Bank of India, popularly known as the digital rupee (e₹), has faced a distinct set of challenges since its pilot over two years ago. Despite multiple efforts to promote its adoption, it has not yet achieved widespread use. As of March 31, 2024, the total value of digital currency in circulation was ₹234.04 crore for retail transactions, compared to ₹5.70 crore a year ago, according to RBI data (see chart). Although there has been some growth in retail digital rupee (e₹-R) transactions, its share is negligible (0.006%) in comparison to the total banknotes in circulation.

THE CHALLENGES