Usage of central bank digital currency or CBDC, popularly referred to as e-Rupee (e-Re), in the first two weeks since the rollout has been less than expected because there are still doubts on whether the transaction using digital currency is anonymous.
While the Reserve Bank of India (RBI) has said the e-Rupee transactions are anonymous, on-ground implementation is not clear on this front.
Can E-Rupee be successful?
For example, the person making the payment and the one receiving it will get an SMS from the respective banks whose e-Re apps are used for the transaction. Issuing such messages is presently mandatory under the law for any digital transaction and e-Re is no exception. “If SMS should be sent, then the bank which is issuing the message has the transaction trail. This makes e-Re pseudo-anonymous, not fully anonymous,” said a highly placed source.
The RBI is working on addressing some of the concerns. A person aware of the matter said some communication from the RBI on this matter is expected soon because anonymity is one of the salient features of the recently piloted retail CBDC. Transactions into and out of the wallet are said to leave no digital trail. However, 11 days after its implementation questions are being raised on whether the digital currency is anonymous.
“RBI could be issuing a circular and/or a discussion paper to address the issue,” the source said. The regulator is keen to iron out concerns with respect to anonymity before more banks and States can be added for the pilot testing of e-Re.
Also, without this aspect effectively taken care of, industry participants feel that e-Re may not find use in high value transactions.
Another person pointed out that one of the reasons why users are apprehensive to try out the e-Re app for high-value transactions is the fear of being tracked. “Cash withdrawals over ₹50,000 require the accountholder to mention Aadhar number. Some customers are wary that even with e-Re if these rules are applicable, they could come under scrutiny and it defies the purpose of anonymity,” he said. To put things in perspective, while the wallet-to-wallet transactions are said to be anonymous, when a user transfer money into the wallet or removes money from the wallet to his/her bank account, these transactions reflect on the bank statement of the user.
“Tax authorities will have data on the amounts transferred into the wallet and we need clarity on whether such transactions will be monitored and questioned at a later date,” said a person quoted above. He added that unless these is comfort from the authorities that users will not be tracked and questioned for the amounts transferred into the wallet, high-value transactions or those above ₹50,000 may never be done through e-Re.
On December 7, RBI Deputy Governor T Rabi Sankar said the RBI is exploring technological and legal solutions to keep e-Re transactions anonymous.