India Begins Pilot Test of Digital Rupee with In-Store Payments

Payments will happen by QR code on a smartphone and with settlement in Rupees. The Reserve Bank of India has partnered with three large Indian banks to begin testing in-store payments with the digital rupee . Retail giant Reliance Retail , which owns multiple brands across several verticals is the first confirmed market participant. Reliance Retail will use one of its grocery chains, Freshpik Gourmet Food Stores, for the pilot test. 

The test will have limited participation but is a significant development for an Indian CBDC. The chosen participants will receive an invitation from their bank. They will need an android phone, to download the digital Rupee app, and to set up a digital wallet at the bank. There will be both an in-store and online trial of the app with different payment processors. 

The digital rupee is a legal tender, similar to sovereign paper currency, issued digitally by the Reserve Bank of India. The online processor, CCAvenue, said, "Accepting payments via digital rupee is as easy as it can get [sic]. On the CCAvenue checkout page, customers can scan a unique QR code from their digital wallet bank app issued by the participating banks. The digital rupee is transferred [sic] from the customer's digital wallet to your digital wallet."

Central bank digital currencies (CBDC) are rapidly emerging. The Atlantic Council reported that financial sanctions on Russia drove many nations to explore CBDCs. Eleven countries have already launched CBDCs, Nigeria being the largest economy. One hundred fourteen countries are developing a CBDC, representing more than 95% of the global GDP. India is among over 20 major economies expected to pilot a CBDC in 2023. Some other countries expected to begin piloting CBDCs in 2023 include Brazil, Australia, Russia, and South Korea.

People joke, "just because you're not paranoid doesn't mean they aren't out to get you.” Digital currencies will have many conveniences, but the minimum cost will be privacy. The maximum charge would be everyone's freedom. The government will know everything about how you spend money. Most people aren’t buying things that would raise red flags, but there is a more dubious ramification. The government has claimed that people must pay their fair share of taxes, which means more than whatever they are paying now. Congress has an ongoing fight about the IRS's ability to monitor bank accounts. A CBDC will give the government complete visibility into all transactions coming and leaving bank accounts. 

CBDC is programmable money. Since it is programmable, it can quickly become a system of control. CBDCs could have an expiration date. If the government was trying to stimulate spending, it could put an expiration on the CBDC. If the government wanted to contain people in an area, the CBDC could be programmed to work within only a couple of miles of the house. Also, CBDCs could be programmed to prohibit certain transactions like firearms or other political hot topics. Suspected criminals could have their money turned off. The government's creativity, integrity, and technology are the only things that limit the dangers. Unfortunately, the government is only verified to have two of the three.

A wise man once said, "There is nothing new under the sun." Electronic payments are not a new danger, just a new manifestation and sophistication of deception. For thousands of years, people have scrutinized the payment process with suspicion. Four thousand years ago, people were concerned about being deceived by payments. The ancient Israelites had a law, "Do not have unequal weights and measures." In bartering societies, a common practice was for the person to carry two different scales. Depending on if the person was buying or selling, determined which direction the scale was slightly out of balance. Around 1900 years ago, a man named John was famously concerned about a payment process that required some mark on the hand or forehead. People would only be able to buy or sell with it.

Let’s think about it for a minute. Suppose you were bartering for food. Your trading partner had two sets of scales and was a known liar. You knew the merchant was about to use an unbalanced scale to weigh your payment. Would you ignore it or say something? Hopefully, you would say something to protest and use a different scale. The government is building a new scale and calling it a CBDC. Is it reasonably balanced or tipped too much in their direction? If you want to avoid using their scale, you must bring your own. Let’s call your scale precious metals. Would you instead measure your wealth in electronic credits or gold bars and coins?

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